Corporation tax instalments for very large companies

A company whose profits for an accounting period exceed £20 million, divided by the number of associated companies plus one, is a very large company and must pay its whole corporation tax bill in four instalments inside the period itself, on the 14th day of months 3, 6, 9 and 12. There is no year of grace when a company first becomes very large, so the year it crosses the threshold can bring six corporation tax payments within twelve months.

What makes a company very large?

Regulation 3(2) of the Corporation Tax (Instalment Payments) Regulations 1998 (SI 1998/3175) defines a very large company as one whose profits for the accounting period exceed £20 million. Several details change how that test works in practice:

• Profits means augmented profits. Regulation 2(2) points to section 18L of the Corporation Tax Act 2010: taxable total profits plus exempt distributions of a qualifying kind received, other than those from 51% subsidiaries and certain quasi subsidiaries. Dividends from outside the group can push a company over the line.
• Associated companies divide the threshold. For accounting periods beginning on or after 1 April 2023, £20 million is divided by the number of associated companies plus one. HMRC’s example is a company with seven associated companies, whose threshold becomes £2.5 million. Under regulation 3(7) the number is taken at the end of the previous accounting period, or at the start of the current one if there was no immediately preceding period. Our page on associated companies explains the control tests.
• Short periods scale it down. For a period under 12 months the threshold is reduced proportionately, under regulation 3(10).
• Small liabilities are excluded. A company is not very large if its total liability for the period does not exceed £10,000, also scaled for short periods.
• One off gains are treated differently. Regulation 3(11) treats a company chargeable for the period only because of a chargeable gain, which would otherwise be very large, as large instead.

Why is there no year of grace?

A company becoming large for the first time can usually pay its first year’s tax on the normal due date if its profits do not exceed £10 million (adjusted for associated companies), under regulation 3(5). That exception only applies to the large company test. HMRC’s guidance for very large companies says there is no such period of grace: a company will be very large even if it was not very large in the 12 months immediately before the accounting period.

For most groups the risk is a sudden step up in profit, an acquisition that adds associated companies, or a large one off receipt that is taxable income. Because the test is applied to the current period, the company may not know it is very large until well into the year.

When are the instalments due?

For a 12 month accounting period there are four equal instalments: 2 months and 13 days after the first day of the period, then every 3 months. HMRC’s guidance describes this as the 14th day of months 3, 6, 9 and 12. For a company with a year ending 31 March 2027 the dates are:

Instalment	Due date
First	14 June 2026
Second	14 September 2026
Third	14 December 2026
Final	14 March 2027

The final payment is due before the year end and before the accounts are drawn up. The comparison with the large company timetable, and the general rules on exceptions, are set out in quarterly instalment payments.

What happens in the year a company first becomes very large?

The move from one regime to the other stacks payments for two different years into the same twelve months.

Illustration only. A company with a calendar year end was a large company for the year to 31 December 2026, with a liability of £4 million paid in four instalments of £1 million. Its profits rise and it is very large for the year to 31 December 2027, with an expected liability of £8 million. Its payments in 2027 are:

Date	Period	Amount
14 January 2027	Year to 31 December 2026, third instalment	£1,000,000
14 March 2027	Year to 31 December 2027, first instalment	£2,000,000
14 April 2027	Year to 31 December 2026, final instalment	£1,000,000
14 June 2027	Year to 31 December 2027, second instalment	£2,000,000
14 September 2027	Year to 31 December 2027, third instalment	£2,000,000
14 December 2027	Year to 31 December 2027, final instalment	£2,000,000

That is £10 million in one calendar year against a £4 million bill the year before. A company that was neither large nor very large in the previous year faces a similar squeeze, because the previous year’s tax is still due on the normal date of 9 months and 1 day after that year end, alongside the new instalments. Treasury and banking plans should allow for the transition year.

How do you estimate a liability for a year that has not finished?

Each instalment is based on the company’s estimate of its total liability for the current period, so the first payment is made with less than three months of results. The estimate should be refreshed each quarter from management accounts and forecasts, with a top up payment if the expected liability rises. Interest runs on any shortfall from each instalment date at the rate for underpaid instalments, which HMRC’s table shows as 6.25% from 29 December 2025, against 3.50% paid on overpaid instalments. How interest is calculated is explained in HMRC late payment interest.

If the liability is expected to fall, regulation 6 allows a claim for repayment of instalments already paid, stating the amount and the change in circumstances. Regulation 13 allows a penalty of up to twice the interest where a company deliberately or recklessly fails to pay an instalment, or fraudulently or negligently claims a repayment, so a low estimate needs to be genuine and documented. Groups can reduce the cost of forecasting errors across several companies through group payment arrangements.

How are instalments worked out for a short period?

For a period shorter than 12 months the rules make sure the final instalment still falls inside the period. HMRC’s guidance sets the last instalment at 14 days after the end of the preceding month where the period ends on the last day of a month, or 14 days after the corresponding date in the preceding month otherwise. The first instalment is still 2 months and 13 days after the start, and any instalment that would fall on or after the final date is dropped.

Each instalment before the last is the lower of the remaining liability and 3 times the liability divided by the number of months in the period, with part months expressed as a decimal of 30 days. HMRC’s example is a period from 1 January 2028 to 31 July 2028 with tax of £3,100,000: the first two payments are £1,328,571 each and the final payment is £442,858.

What is included in the liability?

HMRC’s guidance says the estimate includes tax charged in respect of controlled foreign companies and the bank corporation tax surcharge. It excludes the bank levy, which a very large bank pays on the large company dates, and corporation tax and supplementary charge on oil and gas ring fence profits. Regulation 5A keeps ring fence amounts on their own timetable, starting 6 months and 13 days after the start of the period, while the company’s other liabilities move to the very large dates.

What mistakes come up most often?

• Assuming the first year exception applies. It is limited to large companies.
• Testing only taxable profits. Exempt dividends from outside the 51% group count towards augmented profits.
• Missing the effect of an acquisition. More associated companies reduce the threshold for the following period.
• Not planning for the transition year. Two years’ tax can fall due in the same twelve months.
• Leaving the estimate unchanged. Interest runs from the first instalment date on any shortfall.

For the wider picture of how profits are taxed, see corporation tax explained.

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Related Accountapedia entries

• Interest on late and overpaid corporation tax
• When is corporation tax due
• Corporation tax rates explained
• Corporation tax limits for short accounting periods
• Long first accounts: splitting into two tax returns
• Pillar Two: multinational top up tax

Sources

• legislation.gov.uk: SI 1998/3175, regulation 3
• legislation.gov.uk: SI 1998/3175, regulation 2
• legislation.gov.uk: Act 2010 c. 4, section 18L
• GOV.UK: Pay corporation tax if youre a very large company
• legislation.gov.uk: SI 1998/3175, regulation 5A
• GOV.UK: Corporation tax paying in instalments
• GOV.UK: Pay corporation tax
• GOV.UK: Rates and allowances hmrc interest rates
• legislation.gov.uk: SI 1998/3175, regulation 13
• legislation.gov.uk: SI 1998/3175, regulation 6

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.