If your business is starting to grow and turn a healthy profit, you might find yourself facing a new tax challenge: Quarterly Instalment Payments (QIPs). These aren’t just for big corporations — even modest-sized businesses can be affected if they’re part of a wider group of associated companies.
In this blog, we’ll break down how QIPs work, when they apply, and what recent changes mean for small businesses and SMEs in the UK.
What Are Quarterly Instalment Payments?
Quarterly Instalment Payments or QIPs are a system used by HMRC to collect Corporation Tax from “large companies” in advance, through four instalments during the accounting period rather than one lump sum after year-end.
A company is considered “large” (for corporation tax purposes) if its taxable profits exceed £1.5 million. However, and this is where it gets tricky, that threshold is divided by the number of associated companies, which can dramatically lower the limit.
What Counts as an Associated Company?
You’re associated with another company if:
- One company controls the other
- Or both are controlled by the same person or group of people
However, not all companies count:
- Dormant companies (with no trading activity during the year)
- Passive holding companies (but only if they meet strict criteria)
Example:
If your company has three associated companies, you divide the £1.5 million threshold by four (that’s three plus your own), giving you a new QIP threshold of £375,000. If your profits exceed this, you could be required to make quarterly payments—even if you’re still a relatively small business in practical terms.
When Do QIPs Have to Be Paid?
If your business is subject to QIPs, you’ll need to make four payments throughout your accounting year:
- First payment: 6 months and 13 days after the start of the accounting period
- Next three: Every 3 months after that
For companies with a shorter year (less than 12 months), payments may be combined.
Here’s an Example Timeline:
Let’s say your company’s accounting period runs from 1 January to 31 December, and in 2024, you cross the QIP threshold.
That means you’ll need to start paying QIPs for your 2025 profits. Your payment schedule will look like this:
- 14 July 2025 – First QIP for 2025
- 1 October 2025 – Corporation Tax due for 2024
- 14 October 2025 – Second QIP
- 14 January 2026 – Third QIP
- 14 April 2026 – Final QIP
Important note: You’ll be making your first QIP payment for 2025 before you’ve even paid your 2024 Corporation Tax bill. That’s a big adjustment for companies new to the system.
How Do You Work Out What to Pay?
At the start of the accounting year, estimate your total Corporation Tax bill, then divide that by four to get your instalments.
If you overpay:
- You can claim a refund, or
- Leave it with HMRC to offset future payments
If you underpay:
- You’ll need to make up the difference as soon as possible
- HMRC may charge interest on any late or short payments
This makes it especially important to get your profit forecasts as accurate as possible, or work with an accountant to adjust as the year progresses.
What Changed in April 2023?
Previously, the test for QIP eligibility used the “51% group test” – a more limited definition of company control.
Now, HMRC uses the broader associated companies test. This means more companies, especially SMEs that are part of larger groups, are being pulled into the QIPs net. It’s easier to be considered “associated” under the new rules, and the more associated companies you have, the lower your profit threshold for QIPs becomes.
For more detail on the associated companies rules, check out this guide from the Association of Taxation Technicians.
Why This Matters for Growing SMEs
Small businesses often hit the QIP threshold unexpectedly—especially those in a group of associated companies. Because QIPs require advance payments, they can impact cash flow if you’re not prepared.
Working with an accountant can help you:
- Forecast tax liability accurately
- Avoid HMRC penalties or interest
- Adjust estimates as your profits change
- Plan for Corporation Tax payments before they sneak up on you
How We Can Help
Navigating QIPs can be complex — especially when you’re hit with them for the first time. Here’s how we support our clients:
Cash Flow Forecasting:
We help you estimate your tax liabilities early so you can plan ahead and meet payment deadlines with confidence.
Group Structure Reviews:
We can review your company structure and identify opportunities to simplify or reduce associated companies, which could delay or eliminate the need to pay via QIPs.
QIP Planning & Compliance:
From payment schedules to interest avoidance strategies, we ensure you remain compliant — without unnecessary strain on your business.
QIPs aren’t just for giant firms anymore. As your business grows—or if you’re part of a wider corporate group—you could find yourself needing to pay Corporation Tax earlier than you expected.
Getting the right advice early on can save you money, reduce stress, and help you manage your cash flow better throughout the year.
Need Help Navigating QIPs?
If you’re unsure whether QIPs apply to your business, or you’re about to cross the threshold for the first time, get in touch. We’ll help you work out what’s due, when, and how to stay ahead of HMRC deadlines without hurting your cash flow.
