HMRC internal manual

Company Taxation Manual

Corporation Tax: computation of income: dividends and other distributions received

You should check the other guidance available on GOV.UK from HMRC as Brexit updates to those pages are being prioritised before manuals.

Part 9A of CTA09: distributions received on or after 1 July 2009

Dividends or other distributions received on or after 1 July 2009 from UK or overseas resident companies are chargeable to CT under CTA09/Part 9A (added by FA09/S34 and SCH14) unless the distribution is exempt.  Most distributions, including those from overseas-resident companies, as well as those from UK companies which were exempt under the previous rule outlined below, are now exempt.  But note that distributions within CTA10/S1000 (1) E and F (non-dividend distributions comprising interest and other distributions out of assets iin respect of non-commercial and special securities, see CTM15500) are not exempt: CTA09/S931D (b).  See INTM65000 for more details on dividend exemption generally.

Distributions received before 1 July 2009

CTA09/S1285, for the short period before FA09/S34 came into force, rewrote the rule formerly in ICTA88/S208, that dividends and other distributions received from a company resident in the UK before 1 July 2009 were exempt from the CT charge.

The excess of franked investment income received in an accounting period over franked payments made in that period was called ‘surplus franked investment income’.  For accounting periods beginning before 2 July 1997 surplus franked investment income could be treated for certain purposes as if it were profits chargeable to CT.  See CTM16200 onwards.

Franked investment income was the aggregate of:

  • the amount or value of a distribution (other than a foreign income dividend (FID)) on which a tax credit is due,


  • the amount of that credit received by a company:
    • which is resident in the UK, and
    • which does not receive the income on behalf of, or in trust for, another person.

A franked payment was the sum of:

  • the amount or value of a qualifying distribution,


  • the proportion of its amount or value which corresponds to the rate of advance corporation tax (ACT) in force for the financial year when the distribution is made.

Distributions made after 5 April 1999 do not create franked payments for the payer, but still gave rise to franked investment income of the recipient which was, for instance, relevant to the calculation of small profits relief - see CTM03600.