- This topic has 5 replies, 2 voices, and was last updated 3 weeks ago by
.
-
Posts
-
Giant Ltd. is a large company, and therefore pays its corporation tax by instalments.
For the eight-month period ended 31 August 2025, the company estimated that its corporation tax liability would be £400,000.
What would Giant Ltd’s first corporation tax instalments be in respect of the eight-month period ended 31 August 2025, and what is the due date of this instalment?
A. £100,000 on 14 April 2025
B. £100,000 on 14 July 2025
C. £150,000 on 14 April 2025
D. £150,000 on 14 July 2025My answer was £150,000 on 14 April 2025.
The answer at the back is D.
I understood that it should’ve been counted from 1st of January. So the date is 14th of July 2025.
But the next thing that is written at the back of the answer is:
For an eight-month period the instalments are due on the 14th day of months 7, 10 and 12 (the last being 4 months after the end of the AP)
I’m confused about the 12th month.
In OT notes it was 13th month.Is it because the AP ends on 31 January 2025?
I kind of get confused between end of the tax year and accounting period.
I mean getting confused if we should do this according to the tax period or accounting period.I need your guidance on which ones should I account for according to the tax year and which ones according to the accounting period, if possible. I’m mixing things up a bit.
Thank you.
Where a company pays its CT by instalments, but the accounting period is short, the amount of the instalments and the due date of the final payment change.
Normally instalments for a 12 month period are 3/12 (= 25%) of the estimated CT liability.
Where the period is short, each instalment is 3/n c CT liability, where n = number of months in the period, so in your example it would be 3/8 x £400,000 = £150,000.
The first instalment is due on the normal due date (14th of month 7) and the last payment is due on the ‘normal due date’ which is 3 months and 14 days after the end of the period (equivalent to 14th of month 16 for a 12 month period) and will not be £150,000, but will be the balancing due. Any other instalments are slotted in at 3 month intervals between the date of the first instalment and the date of the last payment.
So in your example, for the 8 month period ended 31 August 2025 (which started on 1 January 2025), the payments will be:
14th day of month 7, so 14 July 2025, £150,000.
Now we put the last payment date in, which is 3m + 14 days after the end of the period, so 31 August 2025 plus 3m + 14 days, is 14 December 2025
Between 14 July 2025 and 14 December 2025, we can fit in another instalment three months after the first (but no later than the final payment), so 14 July 2025 + 3 months (14 October 2025 which is the 14th day of month 10) we pay another £150,000.
Total payments are therefore as follows:
14 July 2025 = £150,000
14 October 2025 = £150,000
14 December 2025 = £100,000 (which is the balance of the liability (£400,000 – 2 x £150,000)This is a bit perplexing and I’m getting it somewhat.
But to have a better understanding, I want it to compare it what it would’ve been if it wasn’t an 8-month period but 12 month instead.So I’m assuming it would have 1st September 2024 as the start of the accounting period.
Therefore 14th of month 7 will be
14th of March 2025
And the next 3 months and 14th day would be
14th June 2025
And thereafter, 3 months and 14th day would be 14th September 2025 (So that’ll be the end of the accounting period on the 13th month)
So 2 instalments before the end of the accounting period.
And 2 instalment afterwards.After the end of the accounting period, 3 months and 14th day would be 14th of December 2025, which is the 16th month, which you’ve previously mentioned for the eight-month period.
So the normal due date under the 12-month period would be in December.
And under 8-month period too it’s on December because it’s after 3-month after the accounting period.
And under 8-month period, when we start from 1st January, 7 month and 14th day is
14th July 2025.And the next instalment is on 14th Oct 2025.
And the next instalment is on 14th Dec 2025 because it was counted from the end of the accounting period which is 31st August 2025.
So these are 3 instalments (and not the usual 4 instalments that would normally have been, had it been 12 month period)
I hope I’m going right.
I wrote it out here because I wanted to confirm if I’ve got this right.I have a doubt here. In the 12-month period, the accounting period ended 31st August 2025, but the next instalment was on 14th of September 2025.
But in the eight month period we count 3 months and 14 days after 31st August 2025 which means the instalment is on 14th Drcember 2025.
This is where I’m getting confused.
The point is, that in a short period, it’s difficult if not impossible to fit four payments in.
So as I stated in my answer to your original post, the trick is to put in the dates of the first instalment (14th of month 7) and the date of the final payment (3m and 14 days after the end of the period) and see if you can squeeze any inbetween at 3 month intervals.
So if you had a five month period 1 January 2025 to 31 May 2025, you could only fit one instalment in on the 14th of month 7 (14 July 2025) and the balancing payment would be due 14 September 2025 (31 May 2025 plus 3m + 14 days). You can’t fit a second instalment in as that would be due on 14 October 2025 (3 months after 14 July 2025) which is after the final payment is due.
I got it now.
It’s much easier if I do the dates of the first and last instalments and put anything in between. I’m getting the method now.Thank you so much. This was a bit tricky topic.
- The topic ‘Quarterly Instalment’ is closed to new replies.