Why are more companies having to make QIPs? (Quarterly Instalment Payments)

Since April 2023, changes to HMRC’s associated company rules have meant far more businesses are being pulled into Quarterly Instalment Payments (QIPs).

Previously, QIPs were largely seen as an issue for formal corporate groups. However, the updated rules mean that companies do not necessarily need to sit within the same group structure to be treated as associated.

Businesses under common control, even if they operate entirely separately, can now be aggregated when applying the taxable profit thresholds of £1.5m (large companies) and £20m (very large companies). This shift is catching many owner-managed businesses off guard. Here’s why it’s happening and what business owners should be thinking about.

What are QIPs?

Quarterly Instalment Payments, or QIPs, require companies to pay their Corporation Tax in four instalments during their accounting period. Corporation Tax would normally be paid 9 months plus 1 day after the year end, but QIPs changes that and, with it, the cashflow picture for the whole year.

HMRC likes QIPs because they facilitate earlier collection of tax from larger or growing businesses, rather than having to wait 9 months and a day after each year end.

When do QIPs have to be made by companies?

UK limited companies deemed large, will have to use QIPs to pay their Corporation Tax bill if it passes a headline threshold of £1.5million in taxable profits.

This might seem like a high ceiling, but there is a crucial rule that many companies miss. The £1.5million threshold is shared across associated companies.

What’s an associated company?

Associated companies are companies that sit under common control. For example, they may have the same owner(s) or be part of the same corporate group and this even includes companies registered overseas which do not pay corporation tax in the UK. This means the “effective” threshold can be much lower than many owners expect.

HMRC’s associated company rules are quite broad. A company is considered associated with another if:

One has control over the other
Both are under the control by the same people. This applies even if the companies don’t trade together
The companies have common ownership or control, even if they aren’t in a group
One company is entitled to over 50% of another company's net assets on a winding up, which includes rights on shares and as a loan creditor

Please note these are not the only reasons why companies may be deemed associated.

So why is this causing problems for businesses?

A standalone company with profits of £1.5million would normally be the only one over the threshold. But in across four associated companies, that same £1.5million is effectively divided by four. In other words, each company becomes “large” at £375,000 or more taxable profit.

Why more companies are falling into making QIPs

More companies are finding themselves having to make QIPs for a few reasons. People used to assume QIPs are just for multinational corporations, but this is no longer the case. There are three reasons that stand out most of all:

1. More businesses are operating through multiple entities

There is a huge diverse range of companies operating as limited companies in the UK, across multiple entities.

According to the Office for National Statistics (ONS), companies now make up over three-quarters (76.7 %) of the total UK business stock, and this proportion has continued to rise as sole traders and partnerships make up a smaller share of the business population.

Entrepreneurs are increasingly choosing to hold different projects in separate limited companies rather than under single entities. This means more associated companies, and therefore more QIPs!

2. Most UK companies are SMEs

In 2025, there were around 5.7 million private sector businesses in the UK, and 99.9% of these were classed as SMEs. A lot of these are micro-businesses, but a large chunk are SMEs and multi-entity groups.

3. More and more limited companies

In 2025, around 2million companies were registered in the UK, and 44 % of these were single-employee limited companies. There are several benefits to owners using separate companies even for small ventures (such as ring-fencing assets or holding IP). But this means there are many more owners effectively managing multiple limited companies.

It’s affected Gravitate too – here’s how

Here’s an example from ourselves.

The Gravitate Digital Group consists of 4 associated companies.
The £1.5million QIPs threshold is therefore divided by 4 companies. So, the threshold is effectively £375,000 per company.
If any single company exceeds £375k taxable profit, that company needs to make Quarterly Instalment Payments

In other words, you don’t need £1.5million profit in one entity to trigger QIPs!

What are the consequences of getting QIPs wrong?

For businesses that aren’t used to making Quarterly Instalment Payments, their introduction can catch them off guard.

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Risk area	What it means
Cash flow shocks	Having to pay Corporation Tax earlier and more frequently than before
Lack of gradual transition	Just one year of profitability above the threshold triggers the change immediately
Late discovery	Issues relating to QIPs are often discovered after the year end has already passed, or when HMRC has identified a problem and asked questions.

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Needless to say, getting QIPs wrong can create some serious issues for companies and their owners. HMRC is highly likely to charge significant interest rates on late payments. This is further complicated by the fact QIPs are based on a profit estimate before the year-end, which makes it more of a challenge to get right.

There are usually two behaviours that come off the back of this:

Companies estimate higher to avoid interest but suffer a cash flow hit as a result.
Companies estimate accurately or lower, which raises the risk of underpaying and incurring late payment interest.

What should businesses be doing about QIPs?

Quarterly Instalment Payments aren’t inherently a problem – but surprises often are. If your business is being pulled into QIPs it is a sign that your business is succeeding at scaling.

The problems arise when companies reach this stage without realising it or realising too late to plan proactively.

Here’s what you can do to stay ahead:

Review and rationalise associated companies annually

This includes any companies (UK or overseas) under common control, not just formal group entities, in light of the widened post-April 2023 associated company rules.

Ensure your tax adviser is aware of all associated companies

This includes existing as well as new companies, especially ones that haven’t previously paid Corporation Tax.

Forecast profits on a per-entity basis

Rather than looking only at overall group performance, focus on when individual companies may breach the QIPs threshold.

Model the timing of Corporation Tax payments

Total liability is only part of the story. You also need to be able to anticipate cashflow impact under Quarterly Instalment Payments and plan for different scenarios.

Speak to your tax adviser before adding new entities

It’s really important that you seek advice when acquiring businesses or restructuring shares. Changes in control can trigger associated company rules and QIPs unexpectedly.