Instalment Payments system
Due date for instalment payments
For accounting periods ending after 30 June 2002, most large companies with a 12 month accounting period will pay tax in four equal instalments:
- The first of these is due six months and 13 days from the start of the accounting period.
- The second is due three months after the first.
- The third is due three months after the second.
- The final instalment is due three months and 14 days from the end of the accounting period.
Transitional rules applied before 1 July 2002, to ease the transition to Instalment Payments. If you need details of these rules to check an old calculation contact your HM Revenue & Customs office.
Example 1
A large company with an accounting period of 1 January to 31 December 2006 is due to pay its instalments on:
- 14 July and 14 October 2006 during the accounting period
- 14 January and 14 April 2007, after the end of its accounting period.
Special rules for companies in 'ring fence' trades
For accounting periods ending after 30 June 2005 large companies that are liable to Corporation Tax and supplementary charge on profits from ring fence activities have to pay that tax in a maximum of three instalments. Tax on any non ring fence profits remains payable in a maximum of four instalments. ‘Ring fence’ in this context means UK Continental Shelf oil-related activities that under UK law constitute a separate trade.
Instalments are 25%, 25% and 50% of ring fence liability for 12 month accounting periods ending after 30 June 2005 but before 1 July 2006, and in three equal instalments for periods ending after 30 June 2006. The first instalment is due six months and 13 days from the start of the accounting period, the second three months after the first, and the last 14 days from the end of the accounting period.
Example 2
A large company with an accounting period of 1 January to 31 December 2006 is due to pay ring fence instalments on:
- 14 July and 14 October 2006, during its accounting period
- 14 January 2007, immediately after the end of its accounting period.
Other tax (non ring fence) for this company remains due in four instalments, calculated as in Example 1.
Less than 12 month accounting periods
For short accounting periods:
- for most large companies the last instalment is due three months and 14 days from the end of the accounting period
- for large companies that have Corporation Tax and supplementary charge in relation to ring fence profits the last instalment in respect of that tax is due 14 days from the end of the accounting period
- there may be more instalments, up to a maximum of four in all, at three monthly intervals, starting six months and 13 days from the start of the accounting period.
Example 3
A large company, with no ring fence profits, has an accounting period from 1 January 2006 to 31 August 2006.
Its instalments are due on 14 July and 14 October 2006 with a final payment due on 14 December 2006.
Example 4
A large company, with no ring fence profits, has an accounting period of 1 January 2006 to 31 March 2006.
Its final instalment cannot be later than three months and 14 days from the end of the accounting period, which is 14 July 2006.
Because the accounting period is only three months long, 14 July 2006 is the same day its first calculated instalment is due.
The date for any second or third instalment would be later than the date for the final instalment so the whole amount of tax is therefore treated as becoming due on 14 July 2006.
Example 5
A large company, with both ring fence and other profits, has an accounting period of 1 January 2006 to 31 May 2006.
Its final instalment for ring fence and other tax cannot be later than 14 days and 3 months and 14 days from the end of the accounting period respectively. So its final ring fence instalment is due on 14 June 2006 and other tax on 14 September 2006.
The first instalment for the ring fence tax would normally become due on 14 July 2006. As this is later than the date for the final instalment, all ring fence tax is due on 14 June 2006.
The first instalment for other tax is due on 14 July 2006. As the date for the second or third instalments would fall later than the date for the final instalment, all other tax is due in instalments on 14 July and 14 September 2006.
