UK: Quarterly Instalment Payments (QIPs)

Last Updated: 16 February 2000

The Inland Revenue has published an article in its Tax Bulletin for February 2000 clarifying the new QIP system of corporation tax for large companies.

The article includes several worked examples, and is too long to summarise here. However, it will be helpful to focus on the central points.

Overpayments and under-payments of early QIPs

Large companies have to make QIPs on account of corporation tax for the current year - which means that they have to estimate the corporation tax on their profits before they know what their profits will be. It follows that early QIPs will almost certainly turn out, with hindsight, to be either too high or too low.

The QIP regulations require the company to keep its estimate of its total corporation tax liability for the period under review, and adjust its later QIPs accordingly.

The Revenue has explained that the QIP system ‘is best thought of as creating a running balance of payments and liabilities, not a series of free-standing liabilities.’

This gives the company some room to manoeuvre if it reduces its estimate of its total liability. If QIPs paid to date exceed the proportion of the latest estimated liability which should have been paid to date, the company can either claim a tax refund or else reduce its next QIP - depending which will be more convenient in its particular circumstances.

Top-up payments

Conversely, if the company increases its estimate of its liability, it faces an exposure to interest on underpaid tax. The Tax Bulletin notes that this could happen if the company had an unexpected opportunity to sell a capital asset and realised a large capital gain. The Revenue has explained that the company can minimise its exposure to interest in such circumstances by making a top-up payment at any time. The company does not have to wait until the next QIP date.

Interest on QIPs

Interest runs on overpaid and underpaid balances during the period from the first QIP date to the normal tax due date. However, the Revenue only calculates interest once the tax charge is established and the normal due date has passed. Until then, the Revenue neither pays nor collects interest on QIPs.

The Revenue pays interest for each day on which the total amount paid to date exceeded the amount which should have been paid by that date. The Revenue charges interest for each day on which the total amount paid to date was less than the amount which should have been paid by that date.

Several conclusions follow from this.
  • Unless the company’s estimates of its liability have been consistently too high or too low, it will receive or pay net interest.
  • It will be wise to check the Inland Revenue’s interest calculations, in case of input errors.
  • Although the Revenue will not calculate interest on QIPs before the normal due date, the company will need to, as part of its treasury management.

Group payment arrangements (GPAs)

Groups of companies can enter into GPAs with the Revenue, to mitigate the compliance difficulties of the QIP regime. The Revenue encourages groups to do this, as it simplifies the administration for their staff too.

The Tax Bulletin article includes a reminder that the Revenue ‘will only normally agree to enter into a group payment arrangement for an accounting period if [it] receive[s] the completed arrangement document at least two months before the first quarterly instalment payment is due.’

GPAs need to be considered carefully, to ensure that they are appropriate to the group’s needs. For example, should separate GPAs be set up for separate sub-groups? Are there any subsidiaries which must, or should, be excluded?


The Tax Bulletin article states: ‘The Revenue is monitoring the transition to this [QIP] system. Early indications are that companies are coping with the change, but we are continuing to consult companies’ and tax advisers’ representative bodies. It will be some time before we can draw firm conclusions.’

Those responsible for computing QIPs can already draw the firm conclusion that they need to liaise, and not only with the Revenue Accounts Office. They need to liaise with their accounting and operational colleagues, to ensure that they can amend their corporation tax estimates promptly, taking account of fluctuations in profits and unexpected capital gains. They need to liaise with the corporate treasurer, to ensure that the appropriate amounts are paid (or reclaimed) and that interest on QIPs is correctly calculated.

KPMG Tax Advisers are well placed to assist with the practicalities of QIPs. For further information, speak to your usual KPMG tax contact.

For further information, please speak to your usual KPMG contact.

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