OT21302 - Corporation Tax Ring Fence and Supplementary Charge

Payment in Three Instalments of Ring Fence Corporation Tax and Supplementary Charge: Commencement and Transitional Arrangements

The new rules for three instalment payments of ring fence corporation tax and supplementary charge apply to the tax liability of companies with ring fence profits in respect of accounting periods ending on or after 31 July 2005.

There are transitional rules for the first accounting period ending on or after 31 July 2005. Under these rules, a company with a normal 12 month accounting period pays the same amount for the first two instalments as under the existing quarterly instalment regime. But it is required to pay the remaining liability on the third instalment date. This means a company which draws up its accounts to 31 December 2005 must pay its three instalments of ring fence corporation tax and supplementary charge for the transitional period - the year ending 31 December 2005 – as follows

For accounting periods that are less than 12 months long, the amount due on any instalment date that is not the final payment is found using the formula 3 x RFA/n, where

RFA is the amount of ring fence corporation tax and supplementary charge for the period (the “ring fence amount”) and

n is the number of whole months falling within the accounting period plus the number of extra days divided by 30.

The amount due on the final instalment is the balance of the ring fence corporation tax and supplementary charge due for the accounting period less any earlier instalment payments.