The Quarterly Instalment Payment regime (QIPs) is not new, but with HMRC late payment interest rates continuing to remain high, many businesses are increasingly concerned about interest charges on their instalments.
While companies cannot control interest rates, and forecasting tax liabilities will never be an exact science, there are practical steps groups can take to manage their exposure. One option that is often under-used is a Group Payment Arrangement (GPA).
Managing Interest Risk Under the QIPs Regime
Groups within the QIPs regime can reduce the risk of unexpected interest charges by focusing on three key areas.
- Know Your QIP Dates
The QIP regime is complex, and payment dates can change when companies:
- Join or leave groups
- Experience changes in profit levels
This is particularly important in the first year a company falls within the QIPs regime. Looking ahead and understanding the relevant payment dates is crucial to avoiding unexpected instalments and unnecessary interest.
- Forecasts and Cash Flow Planning
Many companies base QIP payments on the previous year’s profits. This may be appropriate where profits are regular and predictable.
However, for businesses with fluctuating results, an accurate and regularly reviewed forecast is key to calculating instalment payments more precisely. Forecasting also ensures that quarterly payments are properly factored into the group’s wider cash flow planning.
While no business has a crystal ball, groups do not need to operate without visibility.
- Consider a Group Payment Arrangement (GPA)
A Group Payment Arrangement is a facility offered by HM Revenue & Customs (HMRC) that allows a group of companies to pay corporation tax as a group rather than as individual entities.
It is a simple system that can offer real benefits to groups within the QIPs regime.
How Does a Group Payment Arrangement Work?
Broadly speaking, a GPA operates as follows:
- Companies and their 51% subsidiaries enter into an agreement with HMRC.
- One company is designated as the nominated company.
- The nominated company makes a single quarterly payment on behalf of all companies within the GPA.
- Individual companies continue to submit their tax returns in the usual way.
Once tax returns have been submitted, the nominated company decides how the quarterly instalment payments are allocated across the group.
What Are the Advantages of a GPA?
Reduced Administrative Burden
For large groups, a GPA can significantly simplify the payment process. Instead of multiple payments being made to multiple payment references, a single quarterly payment covers the group.
Centralised Control of Tax Payments
A GPA keeps control of tax payments centralised, giving parent companies greater visibility over tax compliance. This is particularly helpful where tax or accounting teams are based in a holding or intermediary holding company.
Centralisation can reduce the risk of payments being missed and interest accruing unnecessarily.
Potential Reduction in Interest Charges
It is impossible to estimate the exact corporation tax liability before the year has passed. However, under a GPA, the group can retrospectively allocate payments in a way that is most beneficial once tax returns have been submitted.
How to Put a Group Payment Arrangement in Place
Setting up a GPA requires planning.
Step 1 – Identify the Group Companies
Determine which companies will be included in the GPA and decide which will act as the nominated company.
Step 2 – Submit the Agreement to HMRC
An application is made using HMRC’s standard contract (published here) signed by a director of the nominated company.
Step 3 – Meet the Deadline
The agreement must be sent to HMRC at least one month before the first payment is due for the accounting period.
For example:
- Groups wanting to set up a GPA for the year ended 31 December 2026 must apply before 14 June 2026.
- For groups within the Very Large QIPs regime, the deadline would be 14 February 2026.
Advanced planning is essential to avoid missing these deadlines, reinforcing the importance of understanding your QIP dates.
Once established, a GPA rolls forward automatically until it is revoked by either the group or HMRC.
Is a Group Payment Arrangement Right for Your Group?
Group Payment Arrangements are straightforward and low-cost to implement. They can simplify administration for large groups and may help manage interest exposure under the QIPs regime.
If your group is within the Quarterly Instalment Payment regime and is concerned about interest charges or administrative complexity, a GPA may be worth considering.
Speak to an expert at Menzies today to discuss whether a Group Payment Arrangement is right for your group.
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