Corporation Tax rate – impact on quarterly instalments

At Budget 2020, the Chancellor announced that the Corporation Tax (CT) rate would remain at 19% and would not reduce to 17% on 1 April 2020.

This rate is set at least a year in advance to accommodate companies that pay their CT by quarterly instalments. These companies must estimate their liability within their accounting period and so need to be certain of the rate.

This change in the rate will affect large and very large companies (as defined in the Corporation Tax (Instalment Payment) (Amendment) Regulations 2017) with accounting periods straddling 1 April 2020. These companies will have made instalment payments calculated by reference to the 17% rate applying from 1 April. These payments may now be insufficient and may incur an interest charge (debit interest) as a result. Action required Affected businesses should ensure that they review their quarterly instalments and correct any inadequate payments as soon as possible.

This will mitigate any further potential interest charges. Debit interest will be calculated and charged when the normal due date has passed and the company tax return has been submitted.  Businesses carrying out this review may find that their forecast CT liability may be less than previously expected due to the impacts of the Covid-19 outbreak. In such cases, it may be necessary to reduce or stop subsequent instalments falling due accordingly. If payments made to date are now considered excessive, businesses may make a claim for a repayment of the excess under Regulation 6 of the Instalment Payment Regulations. Claims should specify the amount that the company considers is repayable and the grounds for that belief.

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