The imminent introduction of corporation tax self assessment on companies will mean a substantial increase in the compliance workload and costs of companies.

Corporate self assessment was introduced in the recent Finance Bill and will affect large companies as early as July 1, 1998.

Under the current system, companies have nine months from the end of the tax year to pay their corporation tax bill. Under the new proposals, large companies will initially have to pay 60 per cent of their tax quarterly in advance, starting only seven months into the tax year, rising incrementally to 100 per cent after four years.

While the introduction of personal self-assessment received a fanfare of publicity, the introduction of the same system for companies has not had anywhere near the same level of press interest.

But those companies with a June year end will be in self assessment from July 1, 1998 - only a month from now - and they will start to pay next year's tax liability from February 14, 1999.

The new system may cause major problems for some, particularly for companies who operate seasonal businesses. They will have to estimate their corporation tax bill during the year when they may have no idea what their final results will be.

To make things worse, if they get their quarterly estimates wrong, they will have to pay interest charges, although this will be allowable as a tax deduction.

The best method of easing compliance pressures and minimising interest payments is to work with your advisors. By preparing correct forecasts and calculating tax instalments in advance, uncertainty and strain should be relieved.

Byrne is regional managing partner at Baker Tilly based in Bradford.

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