- How to pay Corporation Tax
- Managing your cash flow to pay Corporation Tax on time
- Deadlines and requirements for Corporation Tax
- No Corporation Tax to pay and refunds
- Interest paid when Corporation Tax is overpaid or paid early
- What to do if you can't pay Corporation Tax
- How HMRC collects unpaid Corporation Tax
- Instalment payments of Corporation Tax
- Group Payment Arrangements for Corporation Tax
Group Payment Arrangements for Corporation Tax
Group Payment Arrangements allow groups of companies to make joint payments of Corporation Tax. They can reduce the administration associated with making a large number of individual payments.
A Group Payment Arrangement might also reduce the overall interest charges that the group needs to pay.
Only certain groups will qualify for Group Payment Arrangements, and to make one, you need to complete a legal agreement. Your payments must also meet certain conditions.
On this page:
- Who does a Group Payment Arrangement apply to?
- Advantages of a Group Payment Arrangement
- How a Group Payment Arrangement works
- Conditions for Group Payment Arrangements
- How to apply for a Group Payment Arrangement
- How to make payments under a Group Payment Arrangement
- What happens at the end of a period covered by a Group Payment Arrangement?
- More useful links
Who does a Group Payment Arrangement apply to?
Companies that can enter a Group Payment Arrangement are a parent company and its 51 per cent subsidiaries (any companies of which it is the beneficial owner of more than 50 per cent of the ordinary share capital). The 51 per cent subsidiaries of those subsidiaries, and so on, can also be included in the group.
This definition of a group for the purposes of Group Payment Arrangements is not necessarily the same as that used by HMRC in relation to other aspects of Corporation Tax or to other tax areas, or by other government departments and agencies.
More about which companies can participate in a Group Payment Arrangement
Advantages of a Group Payment Arrangement
Simplified administration
With a Group Payment Arrangement, you only need to make one payment of Corporation Tax to HM Revenue & Customs (HMRC), no matter how many companies are in the group. But you must make this payment using the special payment reference provided by HMRC, not the reference normally used by the individual companies.
Reduced interest charges
As some or all members of the group will normally have to pay Corporation Tax by instalments, at least four payments will be needed for each accounting period, starting mid-way through the accounting period. So your payments will have to be based on estimates of profits. It follows that the payments you make are unlikely to be exactly right and a ‘top-up' payment or an overall repayment may be needed. There may also be interest due to or payable by HMRC.
A Group Payment Arrangement allows a group to retrospectively allocate the payments it has made against the tax liabilities of its members. The group can do this after all the member companies' tax liabilities are known. This means the group can allocate its payments in a way that benefits it most. Because the interest rate that HMRC charges on an underpayment is higher than the interest they pay on an overpayment, this can result in a net saving of interest for the group.
Once the actual figures for the accounting period are known, HMRC will calculate whether the payments allocated to each company give rise to interest payments to or from HMRC.
Flexibility
A Group Payment Arrangement is simpler and more flexible than transferring overpayments from one member of a group to another member that has underpaid.
Instalment payments of Corporation Tax
More about repayment transfers between group members
How a Group Payment Arrangement works
A Group Payment Arrangement is an optional contract that you may be able to enter into with HMRC, if your company is a member of a group that meets the necessary conditions.
You don't need to include all possible eligible companies in a Group Payment Arrangement, and you can have more than one arrangement to cover different sets of companies within the group. However, any one company can only be included within one Group Payment Arrangement for an accounting period.
How long does a Group Payment Arrangement last for?
When you set up a Group Payment Arrangement with HMRC it remains in place until you tell HMRC you no longer want it or, if there have been payment problems, HMRC decides not to continue it.
Who makes the payments for the group?
The companies in the arrangement nominate one of the members to make the payments on behalf of all the companies within the arrangement. This is known as the 'nominated company'.
Although the nominated company is responsible for making the payments, the liability for Corporation Tax - how much is due, and when - is still the responsibility of the individual companies covered by the arrangement.
Conditions for Group Payment Arrangements
If you wish to apply for a Group Payment Arrangement, the following conditions apply:
- Only companies that are up to date with their filing and payment obligations can take part in a Group Payment Arrangement.
- The nominated company must be resident in the UK but this requirement does not apply to the other companies in the group. UK subsidiaries of overseas companies and UK branches of non-resident companies can be included in an arrangement, and companies qualify even though their 51 per cent connection to the rest of the group is through an overseas parent.
- The 51 per cent subsidiary relationship between members of the group must exist at the time the Group Payment Arrangement document is signed. If it later turns out that this wasn't the case for any of the participating companies, those companies will be removed from the arrangement.
- The participating companies have to make up accounts to the same date as the nominated company.
- Only companies that are active (for example trading) for Corporation Tax purposes should be included in a Group Payment Arrangement. (See the link below for more information).
- You must tell HMRC as soon as a company leaves the group (for example it's been sold). If you don't, then the company will have to stay in the Group Payment Arrangement until HMRC finds out and removes it, which could leave you responsible for its tax liability even though it has left the group.
- If a company leaves a group but money has already been paid into the arrangement on its behalf, you must tell HMRC at once to allow them to allocate payments correctly.
Trading and non-trading for Corporation Tax explained
More about which companies can participate in a Group Payment Arrangement
How to apply for a Group Payment Arrangement
To apply for a Group Payment Arrangement, you must first make sure that all the conditions specified in the section in this guide on the conditions for Group Payment Arrangements are met, or will be met, by the appropriate dates.
You need to complete a Group Payment Arrangement document which is a written legal contract between you and HMRC. The document needs to be signed by a director of the company nominated to make the payments on behalf of the group. You must send it to HMRC at least one month before the first payment is due for the accounting period to be covered by the Group Payment Arrangement. That is six months and thirteen days after the start of the Corporation Tax accounting period.
Send your completed Group Payment Arrangement document to:
Group Payment Team
Debt Management & Banking
HM Revenue & Customs
St Mungo's Road
Cumbernauld
GLASGOW
G67 1YZ
When completing your agreement, you should not fill in the date on page 1. This will be completed by HMRC.
Download a Group Payment Arrangement document (PDF 119K)
More about the Group Payment Arrangement document and how to complete it
How to make payments under a Group Payment Arrangement
Payments made under a Group Payment Arrangement must be paid:
- electronically
- using the separate payment reference that HMRC will issue specifically for the Group Payment Arrangement
When you apply for a Group Payment Arrangement, you must tell HMRC which payment method you'll use. You can use BACS Direct Credit, CHAPS or Bank Giro.
For more information on how to make payments under a Group Payment Arrangement, follow the link below.
Repayments of overpaid Corporation Tax
If a repayment is due under the Group Payment Arrangement, HMRC will make it by electronic transfer to your bank account. Any time a repayment is due; the nominated company should write to HMRC on company headed notepaper and tell them:
- why you think a repayment is due
- the bank account name and sort code you want the repayment paid into
- which of the group's payments HMRC should use to make the repayment
Estimating what to pay
Each payment under a Group Payment Arrangement is a single payment to HMRC on behalf of the whole group. You don't make individual payments for each member, nor do you provide a breakdown to HMRC to explain what the contribution is from each member. You don't have to tell HMRC how the payments are to be apportioned between the members until after all the tax liabilities for the members of the arrangement have been established.
What happens at the end of a period covered by a Group Payment Arrangement?
A Group Payment Arrangement closes for an accounting period at whichever is the later of:
- the date when all companies covered by the arrangement have either filed their Company Tax Returns or had their Corporation Tax payable 'determined' by HMRC
- the last filing deadline date for the Company Tax Returns
Immediately following the closing date for the group payment period, HMRC will use the figures from the Company Tax Returns and/or determinations to work out the actual figures that were due for each payment for each company.
These calculations will also show whether any interest is payable by HMRC, or due to be paid to them.
Read more about interest on instalment payments
Notice of closure
After the Group Payment Arrangement closes for a period, HMRC will issue a 'Notice of closure' (form CT630) to the nominated company, showing the payments made and the Corporation Tax due for each participating company at the date of closure.
The CT630 notice will ask the nominated company to:
- pay any outstanding tax due, or state how it wishes to dispose of any net overpayment
- state, within 30 days, how the payments are to be apportioned between the participating companies - if you don't do this, then HMRC will send you an Apportionment Notice (form CT631) showing you how they intend to allocate the payments for you
How to complete your form CT630
If you need any help completing your form CT630, please contact the Group Payments Team on Tel: 01236 785499.
Find further information on what happens at the end of a Group Payment Arrangement
How HMRC collects unpaid Corporation Tax
More useful links
Find detailed guidance on Group Payments Arrangements
Go to HMRC guidance notes on Group Payments Arrangements
What to do if you can't pay Corporation Tax
