COM95010 - Payments: quarterly instalment payments: anti-avoidance provisions

A company may be caught under the anti-avoidance regulations (Regulation 14) if on or after 25 November 1997 and before 30 June 2002 it

• Caused the start or end date of a ‘relevant AP’ to change

And / or

• Entered into any arrangements the effect of which was to transfer some or all of its taxable profits to another company in the same group other than a non resident company in whose hands the taxable profits transferred are outside the charge to UK CT

Resulting in

• An amount(s) of CT for any part of an AP beginning after 1 July 1998 and ending before 1 July 2002 becoming payable later than it would otherwise have done

A ‘relevant AP’ is an AP which, but for the action taken by the company outlined above would have

• Ended after 24 November 1997 and before 1 July 2002

And

• Started immediately after another AP and lasted for 12 months

The provisions do not contain a motive test but there are let outs for some specific changes and arrangements.

Details about the let outs are given in the Company Taxation Manual (CTM) at CTM92790.

If a company falls within the anti-avoidance provisions (and is not let out), the company is liable to pay an amount that is effectively equal to interest at the rate applicable under S178 FA89 on the tax payments 'deferred' (Regulation 14(2)).

For more information on raising the charge and an example see the Company Taxation Manual (CTM) at CTM92800-92810 and CTM92840.

Note: The Inspector must ask for authority to raise a charge under this provision from Business Tax 1/1. 

The charge under the anti-avoidance provision in Regulation 14 is not ‘tax’ or ‘penalty’ but is akin to ‘interest’. To get the charge onto the COTAX record the Inspector will

• Write to Banking Operations and ask for the charge to be posted onto the COTAX record for the company as 'debit interest' (in addition to any actual debit interest payable)

Banking Operations will

• Use Function RMIC (Raise Manual Interest Charge) to raise the charge. For more information see section 'Quarterly Instalment Payment Anti-Avoidance Provisions (AG)' in the 'Interest' business area of the COM

By concession, if the tax is paid on the dates it would have been due if the AP had not been changed, HMRC will regard payment as accelerated in terms of Regulation 14(3) and no charge will arise, except as in the normal way when the amounts paid are less than the amounts due.

For more information about this concession see the Company Taxation Manual (CTM) at CTM92820-92830

Note: The Inspector must ask for authority to allow accelerated payments from Business Tax 1/1. 

To prevent COTAX from calculating interest automatically in accelerated payment cases the Inspector must

• Use Function MAPS (Maintain AP Signals) to set the Credit / Debit Interest Indicator(CDII) (Word 29KB) and Clerical Interest Indicator (CII (Word 32KB)) signals on the records of all the companies involved for the AP

The company should alert Banking Operations to the fact that early payments are being made to avoid a charge arising under Regulation 14, paragraph 3 of The Corporation Tax (Instalment Payments) Regulations 1998 and that this has been agreed with the Inspector.

Banking Operations will

• Accept global payments from the companies involved which will be held in a suspense account and allocated when the liabilities are finalised

For a list of functions to use in particular situations, see COM95011.

For legislation applying to this subject, see COM95012.