Managing your corporation tax obligations this distribution season

The normal due date for tax payments is nine months and one day after the end of the accounting period.  This means that for Lloyd’s Corporate Members (“NameCos”) with a December year-end, tax will be due on 1 October each year. 

With Lloyd’s profits for the 2022 YOA being distributed throughout April and May 2025, receiving companies may not need to pay tax on these profits until 1 October 2026 (nine months and one day following 31 December 2025). However, they will need to pay tax for the period ending 31 December 2024 (which includes Distribution of 2021 YOA profits) on 1 October 2025. 

Overview of Corporation Tax Rates

• Main rate: 25% for profits over £250,000*

• Small profits rate: 19% for profits up to £50,000*

• Marginal relief applies for profits between £50,000 and £250,000

*Note that these thresholds are divided by the number of ‘associated companies’ a NameCo has. 

Associated Companies

An associated company is one that is controlled by another company, or both are controlled by the same person(s). Control includes direct or indirect influence over the company's affairs.

The profit thresholds mentioned above are divided by the number of associated companies.  For example, if a company has two associated companies, the £50,000 threshold above becomes £16,667 (£50,000 divided by three) and the upper threshold becomes £83,333.

Quarterly Instalment Payments (“QIPs”) – some companies may need to pay tax sooner 

Whilst most NameCo’s will not need to pay tax on the 2022 YOA distribution until October 2026, ‘large’ and ‘very large’ companies are required to remit their tax liability in QIPs throughout the year, rather than in one payment following the year end.

Large companies are defined as those with annual taxable profits between £1.5 million and £20 million. These thresholds are again divided by the number of associated companies that the company has.   

A company should be exempt from QIPs for the first year it is considered to be ‘large’ (unless its profits are over £10m). For subsequent years, payments of the estimated tax liability are due in months 7, 10, 13, and 16 following the start of the accounting period.

As such, if a company with a 31 December 2025 year-end is considered ‘large’ for the first time in the 2024 accounting period, it will need to make its first tax payment for the 2025 period on 14 July 2025. This falls before the first tax payment required for 2024, which is due by 1 October 2025. Remaining QIPs for the 2025 tax liability will then be due on 14 October 2025, 14 January 2026, and 14 April 2026. 

With this in mind, members will need to assess whether their company met the ‘large’ profit threshold for 2024, and plan for their tax payments accordingly if those thresholds are met again in 2025.

Very Large Companies

Very large companies are defined as those with annual taxable profits over £20 million (again, divided by the number of associated companies).  Payments are then due in months 3, 6, 9, and 12 of the accounting period, i.e. the first 2025 payment will be due 14 March 2025 followed by payments on 14 June, 14 September, and 14 December.  

Note that where a company is considered ‘very large,’ there is no exemption for the first year of QIPs. 

Penalties

Penalty interest will be charged on overdue instalments – since February 2025, the HMRC interest rates for late payment of tax have been:

• Late payment interest rate: 7.00%

• Repayment interest rate: 3.50%

These rates are linked to the Bank of England base rate, with the late payment interest rate set at the base rate plus 2.5%. 

Starting from April 6, 2025, the late payment interest rate will increase by 1.5 percentage points to 8.5%   

This means the general late payment interest rate will rise from the Bank of England base rate plus 2.5% to the base rate plus 4%. This change was announced in the Autumn Budget 2024 and aims to “encourage timely tax payments and ensure fairness for those who pay on time.”

If you would like further support in managing your NameCo’s tax position, please reach out to me at jon.jacobs@argentagroup.com to discuss your options.