Currently, large companies with taxable profits of more than £1.5m in an accounting period are required to pay corporation tax by instalments starting during the period to which the liability relates.

Under the new rules, for accounting periods beginning on or after 1 April 2017, very large companies - with taxable profits of more than £20m - will be required to pay corporation tax instalments four months earlier than large companies.

For a company with a 12-month accounting period, instalments will be due in months three, six, nine and 12 of the period to which the liability relates.

The payment changes are expected to raise an additional £4.49bn in tax revenues in 2017/18, £3.13bn in 2018/19, falling to £140m in 2019/20 and £60m in 2020/21, according to government estimates.

51% groups

Where the company is a member of one or more 51% groups, the threshold of £20m will be divided by the number of related 51% group companies plus 1.

For example, if a company has three related 51% group companies, the threshold is £5m (£20m/(1+3)). This is the same way in which the threshold of £1.5m for entering the instalment payment regime is apportioned.

A company is a related 51% company of another if either company is a 51% subsidiary of the other, or both are 51% subsidiaries of a third company.

For companies with annual taxable profits of £20m or less, payment dates will not change.

For a 12-month accounting period, companies with taxable profits in excess of £1.5m but £20m or less will continue to make instalment payments in months seven and 10 of the accounting period to which the liability relates, and months one and four of the next period.

Companies with taxable profits of £1.5m or less will pay corporation tax nine months and one day after the end of the accounting period.

HMRC said this policy ensures that the largest companies pay tax closer to the point at which they earn their income, and is consistent with the government’s strategy for tax administration.

It also brings the UK’s system for payment of corporation tax much closer to those already in operation in other G7 countries.

HMRC estimates that changes to its IT system to accommodate the changes to corporation tax payments will cost an estimated £1.62m.

The corporation tax rate will be reduced to 19% in 2017 and to 18% in 2020.

The closing date for feedback on the draft legislation is 26 February 2016. The measures were first announced in the Summer Budget in July 2015.

Details are here: https://www.gov.uk/government/publications/draft-legislation-corporation-tax-payments

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