Advanced Taxation (UK) · Corporation tax: the effect of a group structure

Group Payment of Tax and Company Disposals Planning

Updated 11 October 2026 · Fact-checked

Group payment of tax covers when each company pays corporation tax, how the £1,500,000 instalment threshold is shared among associated companies, and the interest on late or early payments. Disposal planning compares a share sale with an asset sale, using the substantial shareholding exemption, degrouping charges, and BADR for individual shareholders.

Understand Group Payment of Tax and Company Disposals Planning

Every company in a group is a separate taxpayer. Each one pays its own corporation tax, even though losses, gains and assets can move around the group. So payment dates and interest are worked out company by company, with one important exception: the group affects the size of the instalment threshold.

A company that is not large pays corporation tax 9 months and 1 day after the end of its accounting period. A large company pays by quarterly instalments. The profit threshold is £1,500,000, divided by 1 plus the number of associated companies. So a group of four companies has a threshold of £375,000 each. A company with profits above its threshold is large. Large companies pay instalments on the 14th day of months 7, 10, 13 and 16 after the start of the period. Companies with profits over £20,000,000 (also divided by 1 plus the number of associated companies) are very large and pay earlier, on the 14th day of months 3, 6, 9 and 12 after the start of the period. Where several companies are involved, the payment can be dealt with under a group payment arrangement, where a nominated company pays for others. Each company's own liability is still what counts.

Interest runs from the due date to the date of payment. Use the rates in the tax tables: 8.50% on underpaid tax and 3.50% on overpaid tax. Interest paid or received is a non-trading loan relationship item. It is deductible for the payer and taxable for the receiver. Underpaid instalments carry interest from each instalment due date. Interest on overpaid instalments runs from the later of the instalment due date and the date of payment, until the earlier of the date of repayment and the normal due date (9 months and 1 day after the period end). After the normal due date, interest on overpaid tax runs at the overpaid-tax rate in the tax tables until repayment. State that treatment clearly if the question gives the detail.

Disposal planning starts with one question: who is selling, and what? If a company sells shares in a subsidiary, the substantial shareholding exemption (SSE) may make the gain exempt. In outline, the investing company must hold at least 10% of the ordinary share capital of the company sold for a continuous 12 months in the 6 years before the disposal. The company sold must be a trading company or the holding company of a trading group or subgroup, both during the 12-month period and immediately after the disposal. The investing company itself does not need to be a trading company or a member of a trading group, so the trading test is on the company sold. A loss on an exempt disposal is not allowable. If the subsidiary sells its assets instead, the gain is taxed at corporation tax rates in that company, and the owners then face a further tax charge when profits are extracted.

Group points matter too. Transfers within a chargeable gains group are at no gain, no loss. A degrouping charge can arise when the transferee company leaves the group while still holding an asset that was transferred to it within the previous 6 years. The charge is added to the sale proceeds of the shares in the company that is leaving, so SSE may cover it. Within a gains group, gains and losses can be reallocated and rollover relief can be claimed across companies. For an individual who owns shares in a personal trading company, the CGT rates are 18% and 24%, with an annual exempt amount of £3,000. Business asset disposal relief (BADR) gives a 14% rate on qualifying gains up to a £1,000,000 lifetime limit. The shareholder must normally hold at least 5% of the ordinary share capital and voting rights, be an officer or employee, and meet the conditions for 2 years before the disposal. Investors' relief also has a 14% rate and a £1,000,000 lifetime limit. It applies to newly subscribed shares in an unlisted trading company held for 3 years, where the investor is not an employee or officer.

Key rules to remember

Normal due date: Due date = 9 months + 1 day after the end of the accounting period; Applies to companies that are not large. Payment is one lump sum.
Large company threshold: £1,500,000 ÷ (1 + number of associated companies); Reduce proportionately for a short accounting period. Compare with profits (taxable total profits plus dividends from non-group companies).
Very large company threshold: £20,000,000 ÷ (1 + number of associated companies); Not in the tax tables, so learn it. Instalments are due on the 14th day of months 3, 6, 9 and 12 of the period.
Large company instalment dates: Months 7, 10, 13 and 16 after the start of a 12-month period, each 25% of the liability; Due on the 14th day of the month. The final instalment falls after the end of the period.
Interest on underpaid tax: Tax × 8.50% × months late ÷ 12; Rate given in the tax tables as assumed. Runs from due date to payment date.
Interest on overpaid tax: Tax × 3.50% × months ÷ 12; Rate given in the tax tables as assumed. Interest received is taxable.
Corporation tax rates: Small profits rate 19%; main rate 25%; limits £50,000 and £250,000; Limits are divided by 1 plus the number of associated companies. Marginal relief = (£250,000 − augmented profits) × 3/200 × taxable total profits ÷ augmented profits.
SSE conditions: ≥ 10% holding; held 12 months in the previous 6 years; trading test met by the company sold; Gain exempt, loss not allowable. Check the trading test for the company sold, not for the investing company.
BADR: 14% on qualifying gains up to £1,000,000 lifetime; then 18% or 24%; Needs 5% of shares and votes, officer or employee, and trading company, for 2 years before disposal.
Stamp duty on shares: 0.5% of consideration; Paid by the buyer. Asset sales may instead bring SDLT on land.

How to solve Group Payment of Tax and Company Disposals Planning questions

Use this order for any question on group payment dates or on selling a group business.

1Identify who is selling and who is buying. Is it a company selling shares, a company selling assets, or an individual selling shares?
2List the facts you need: holding size, holding period, trading status, group membership, and any earlier intra-group transfers.
3For payment questions, count associated companies, work out each company's threshold, and decide whether it is large, very large or neither.
4Write down the due dates. Then calculate interest with the right rate and the exact months late, early or underpaid.
5For a disposal, test SSE first. If it applies, say the gain is exempt, the loss is not allowable, and check for a degrouping charge.
6If SSE does not apply, compute the gain. For companies, use the rates and group reliefs. For individuals, test BADR conditions, then apply 14%, 18% or 24% and the £3,000 exempt amount.
7Compare the share sale and asset sale on tax cost, extraction cost, stamp taxes and the buyer's likely preferences.
8Finish with a clear recommendation and name any assumptions, clearance steps or risks.

Quickest way: Quick check for payment and disposal questions

When to use it: Use when time is short and the requirement is to advise briefly on timing or on the best way to sell.

Write the three tests in the margin: large? SSE? BADR?
Divide £1,500,000 by the number of companies in the associated group. Compare with each company's profits.
Count months late from the due date, then multiply: tax × 8.50% × months ÷ 12.
Apply SSE first for a company seller. If it is exempt, the share sale is usually better than an asset sale for the company.
For an individual, split the gain: first £1,000,000 at 14% if BADR qualifies, the rest at 24% or 18%. Set the £3,000 exempt amount against gains taxed at the highest rate.
Write one line on degrouping and one on stamp duty at 0.5% before you finish.

Common mistakes in Group Payment of Tax and Company Disposals Planning

Using £1,500,000 as the threshold for every company in the group.
Students forget that the figure is shared among associated companies.
Fix: Count the companies first. Divide £1,500,000 by 1 plus the number of associated companies, and adjust for short periods.
Using the wrong interest rate or direction.
The two rates are close together and both appear in the tax tables.
Fix: Underpaid tax is 8.50% and overpaid tax is 3.50%. Write the rate beside each calculation.
Applying SSE without testing the trading condition or the 10% and 12-month tests.
Students assume any group share sale is exempt.
Fix: Check holding size, holding period and the trading status of the company sold. If any test fails, compute the gain.
Forgetting the degrouping charge after an intra-group transfer.
No gain, no loss transfers feel like the end of the story.
Fix: Look for assets transferred in the last 6 years. Add any degrouping charge to the share sale proceeds.
Giving BADR on the full gain or to a holder under 5%.
Students remember the 14% rate but forget the limit and the conditions.
Fix: Apply 14% only up to £1,000,000 of lifetime qualifying gains. Check 5% of shares and votes, officer or employee status, and the 2-year period.
Recommending the lower tax option only, without considering the buyer or wider consequences.
Students focus on the calculation and ignore the commercial context.
Fix: Add a short note on buyer preferences, warranties, stamp taxes and cash flow. This also earns professional skills marks.

Worked examples

Example 1

Delta Ltd has no associated companies and is not part of a group. Its 12-month accounting period ends on 31 December Year 1. Its corporation tax liability is £60,000 and its profits are below the £1,500,000 large company threshold, so it is not a large company. It pays on 1 March Year 3. Calculate the interest on the late payment, using the rate in the tax tables.

Show the solution

Due date: 9 months and 1 day after 31 December Year 1, which is 1 October Year 2.
Payment date: 1 March Year 3. From 1 October Year 2 to 1 March Year 3 is 5 months, so the payment is 5 months late.
Rate on underpaid tax: 8.50%.
Interest = £60,000 × 8.50% × 5 ÷ 12.
£60,000 × 8.50% = £5,100. Then £5,100 × 5 ÷ 12 = £2,125.
The interest is a non-trading loan relationship debit and is deductible for Delta Ltd.

Answer: Interest on the late payment is £2,125. It is deductible in the computation of Delta Ltd.

Example 2

Mia owns 100% of the shares in M Ltd, a trading company. She has been a director for 8 years and has held the shares throughout. She has used none of her BADR limit. She sells all the shares and makes a gain of £1,400,000. She is a higher rate taxpayer with no basic rate band left and has no other gains. Calculate her CGT.

Show the solution

Test BADR: she has at least 5% of shares and votes, she is an officer, and M Ltd is a trading company for the last 2 years. BADR applies.
Qualifying gains up to the lifetime limit: £1,000,000 at 14%.
Remaining gain: £1,400,000 − £1,000,000 = £400,000, taxed at 24% as she has no basic rate band left.
Set the £3,000 annual exempt amount against the gain taxed at 24%, which saves more tax. Taxable at 24%: £400,000 − £3,000 = £397,000.
CGT at 14%: £1,000,000 × 14% = £140,000.
CGT at 24%: £397,000 × 24% = £95,280.
Total CGT: £140,000 + £95,280 = £235,280.

Answer: Mia's CGT liability is £235,280.

Exam tips

Always state the threshold calculation for instalments. Show the division by associated companies, even if the answer looks obvious.
Use the tax tables for rates: interest, BADR, CGT and stamp duty. Do not rely on memory for those figures.
Write down the SSE conditions as a checklist before you apply them. Marks are given for each condition tested, not just for the conclusion.
In advice questions, compare at least two options, give figures, and end with a clear recommendation. Add a short point on risks or assumptions for professional skills marks.
Check dates carefully for interest. Count months from the due date, not from the end of the accounting period.

Practice questions from Corporation tax: the effect of a group structure

Group Payment of Tax and Company Disposals Planning in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

ACCA Applied SkillsGroup Relief and Corporation Tax Groups

Group Payment of Tax and Company Disposals Planning: frequently asked questions

How is interest on late paid corporation tax calculated in ATX?

Interest runs from the due date to the date of payment. Use the rate on underpaid tax in the tax tables, 8.50%, and multiply the tax by the rate and the months late divided by 12. The interest is deductible for the company paying it.

Does being in a group change when corporation tax is paid?

Each company still pays its own tax. The group matters because the £1,500,000 threshold for quarterly instalments is divided by 1 plus the number of associated companies. This can make a company large when it would not be on its own.

Should a group sell subsidiary shares or the subsidiary's assets?

A share sale by a company can be exempt under SSE if the conditions are met, so it is often the better option for the seller. An asset sale is taxed in the subsidiary at corporation tax rates, and extracting the cash may add a further charge. The buyer may prefer assets, so you should mention negotiation and stamp taxes.

When can an individual shareholder claim BADR on a share sale?

The company must be a trading company and the shareholder must hold at least 5% of the ordinary shares and voting rights. They must also be an officer or employee, with the conditions met for 2 years before the sale. Qualifying gains up to £1,000,000 over a lifetime are taxed at 14%.