The Spring Budget 2023 has provided much-needed clarity and stability for large corporates by confirming that the main rate of corporation tax will be 25% from 1 April 2023.

Additionally, the introduction of “full expensing” for qualifying capital expenditure on plant and machinery is a significant development to replace the Super Deduction which comes to an end on 31 March 2023, especially for companies operating with the Quarterly Instalment Payments (QIPs) regime.

Companies classified as “large” and “very large” are required to accelerate their corporation tax payments through the QIPs regime. Typically, this involves estimating payment amounts based on forecast profitability and capital expenditure. Our recent article, Preparing for the new rates of Corporation Tax - 19%, 25% and 26.5%, explored how the introduction of the “associated companies” rules could have an impact on QIPs.

With the introduction of full expensing, it is recommended that companies within the QIPs regime revisit their calculations and adjust their payments on account accordingly. This is particularly recommended where the group as a whole is expected to exceed the £1m Annual Investment Allowance (AIA) which continues to be available as an alternative to the new full expensing.

If groups are expected to breach the £1m AIA limit, the introduction of full expensing may result in lower-than-expected corporation tax liabilities, as relief can be obtained in full in the year of purchase for qualifying fixed assets. This could lead to lower payments on account being required, moving from the very large to the large company QIPs regime, or even moving out of the QIPs regime altogether.

We recommend that large and very large QIP payers review their QIP calculations considering the introduction of full expensing at Budget 2023. 

Get in touch

Read the rest of our Spring Budget analysis on our Budget Hub. For more information, or if you would like to discuss the impact of full expensing on your QIP calculations, please don't hesitate to get in touch with me at David.Rome@jcca.co.uk.