Repayment claims for corporation tax instalments

Large and very large companies are required to pay their corporation tax liability up front in four quarterly instalments. For further details of Quarterly instalments payments (QIPs), see the QIPs ― when do they apply? guidance note.

The instalment amounts are based on the estimated corporation tax liability of the company’s current accounting period. Therefore, this means that large and very large companies will be required to forecast their tax liabilities as accurately as possible in order to avoid interest charges on underpayments. Very large companies need to carry out such forecasts even earlier during the accounting period as their instalment payments must all be paid during the accounting period.

On completing the tax return for an accounting period, a company may find that it has overpaid its corporation tax instalments for that accounting period. In these circumstances, the company will be able to claim a repayment from HMRC, together with interest.

Normally HMRC does not accept claims for repayments that are dependent on events in subsequent accounting periods. An example would be a company that makes instalment payments for Year 1, but then sustains losses in Year 2, which the company intends to carry back to Year 1. Generally, until Year 2 has ended and the losses have crystallised, HMRC will not allow a claim for a repayment of the tax paid in Year 1.

However, HMRC has confirmed that they will accept such claims in exceptional circumstances; for example, where the losses in the subsequent accounting period are so large they will comfortably exceed the profits in the previous accounting period. Full supporting evidence will be required from the company to confirm the exceptional circumstances; this would include management accounts, board of director’s reports and any public statements. For further details, see CTM92650.