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HMRC internal manual

Company Taxation Manual

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HM Revenue & Customs
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Distributions: impact on Corporation Tax: franked investment income under the ACT system abolished from 6 April 1999 - use of

ICTA88/S208, ICTA88/S231 (2), ICTA88/S238 (1) & (1A) and ICTA88/S241 (1)

A company does not pay CT on any franked investment income (FII) that it receives.

The following repayment provisions apply to distributions made before 6 April 1999.

The company cannot receive payment of the tax credit attaching to its FII, unless:

  • the company is wholly exempt from CT or is only not exempt in respect of trading income (ICTA88/S231 (2)(a)),

or

  • the distribution is one in relation to which exemption is given, other than under ICTA88/S208; this exemption can be specific or by way of a more general exemption from tax, (ICTA88/S231 (2)(b)),

or

  • the FII is ‘surplus FII’ and the company claims under ICTA88/S242 or ICTA88/S243 for accounting periods beginning before 2 July 1997 (see CTM16200).

The FII received in an accounting period is set off against qualifying distributions made before 6 April 1999 (except any FIDs paid, see CTM22010) in the accounting period when calculating the ACT payable by the company for qualifying distributions made before 6 April 1999. However, the FII taken into account in this way must exclude any that is the subject of a claim under ICTA88/S231 (2).

Any FII the company sets against qualifying distributions paid before 6 April 1999 for the purposes of determining, before that date, the amount of ACT due, cannot later be used for the purposes of ICTA88/S231 (2).