In part 1 of this article, we explored when corporation tax becomes due for companies which operate a standard 12-month accounting period, had total taxable profit (TTP) plus ABGH distributions, termed augmented profits, underneath or above the £1.5 million threshold. In the latter’s case, payments had to be made in instalments. In the second part of this series, we will explore how the profits threshold of £1.5 million changes if a company is part of a group or has a chargeable accounting period shorter than 12 months before concluding by considering how due dates for instalments are affected for companies considered ‘very large’.

Suppose your company has a chargeable accounting period (CAP) of only 10 months. Does this mean your augmented profits should still be compared with the threshold of £1.5 million? The answer is no. The threshold must be adjusted for companies experiencing shorter CAPs and as such a 10-month CAP translates into a threshold of £1.25 million [(10/12) *£1,500,000]. Hence, if such a company’s augmented profit is expected to exceed £1.25 million, it would have to make payments in instalments even if TTP is under £1.5 million. The due dates remain the same, the 14th day of month 7,10,13 and 16 from the start of the accounting period. As mentioned in the first part, this means some degree of estimation will be required of the final TTP for the 10-month period since 2 payments (months 7 and 10) are due before the CAP ends.

Now suppose a company has a standard 12-month CAP but is part of a group of companies whereby it either owns (or is owned by) a company holding at least 50% of the shares. In financial reporting terminology, the parent company would be said to exercise control over the subsidiary. Provided that the subsidiary isn’t ‘dormant’, the threshold would have to be adjusted for the group structure as there are 2 companies in the group. Hence, the threshold becomes £750,000 for each company. It doesn’t matter whether the subsidiary or parent is based in the UK or elsewhere. If the company is part of a group, this calculation applies. The more companies in the group which aren’t dormant and where at least 50% shareholding exists, the more the threshold is squeezed.

Finally, let’s consider the case for Corporation Tax for companies which are considered ‘very large’ by tax regulations. These are entities that earn augmented profits in excess of £20 million. In such cases, the payments are still required to be made by instalments, but the dates are different. In such cases, payment must be made by the 14th of months 3,6,9 and 12 from the start of the accounting period. The rules relating to group companies and shortened accounting periods apply to the ‘very large’ companies’ threshold too.

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