Why am I paying tax quarterly?

Corporation tax has to be paid quarterly when a company is paying the full rate of corporation tax.

In order to pay the full rate of corporation tax, you have to have profits of more than £1.5m in a year.  Few do, and so HMRC take the view that a company that large can afford to pay tax upfront.  Obviously HMRC do not understand that a large company can have large cash flow problems too!

It is also the case that companies in a group, even small companies, can fall into the full corporation tax rate regime, which requires quarterly estimated tax payments in advance.  The threshold for the full rate is £1.5m, but that threshold is divided by the number of companies with which you are associated.  So if you are associated with nine other companies (associated has a complicated meaning, and it is best to call for advice if you need it), your threshold is £150,000.  If you make profits of £150,000, you have to make quarterly tax payments.

With some advance planning, we can help ensure that this does not create an anomaly by which all profits are concentrated in one company forcing you into quarterly corporation tax payments, even if they are inappropriate.

To find out more, call us on +44(0)330 024 3200, and talk to one of our business tax experts.

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