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HMRC internal manual

Company Taxation Manual

Distributions: impact on Corporation Tax: franked investment income under the ACT system abolished from 6 April 1999 - surplus - claims under ICTA88/S242 - computation

In computing the surplus franked investment income (FII) for an accounting period that a company can use in an ICTA88/S242 claim for accounting periods beginning before 2 July 1997, the approach is:

  • to view any surplus FII carried forward to that accounting period, as far as possible, as having been used to cover the franked payments (FP) of that or a later accounting period,


  • only then to view any FII received in the accounting period as having been set against any FP made.

This will result in the smallest possible amount being excluded from the scope of the ICTA88/S242 claim (see CTM16200), and will maximise the payment of tax credit.


A company, in an accounting period beginning before 2 July 1997, in the same accounting period:

  • has surplus FII brought forward of £100,000,
  • receives FII of £20,000, and
  • makes FP of £70,000.

The company makes an ICTA88/S242 claim for the accounting period.

The £70,000 FP the company has made in the accounting period are covered by £70,000 of the FII brought forward.

The remaining surplus FII brought forward of £30,000 is carried forward to the next accounting period.

The ICTA88/S242 claim is limited by ICTA88/S242 (9) to the FII received in the accounting period of £20,000. The company can set this £20,000 against the available unused reliefs (see CTM16220) to obtain payment of the tax credit.