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HMRC internal manual

Company Taxation Manual

From
HM Revenue & Customs
Updated
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Distributions: impact on Corporation Tax: franked investment income under the ACT system abolished from 6 April 1999 - surplus - claims under ICTA88/S242 - relief for less than a complete accounting period

For accounting periods beginning before 2 July 1997, an ICTA88/S242 claim may relate to relief for trading losses. ICTA88/S393A (1) may result in relief being given for a period that is not a complete accounting period. In these circumstances the surplus franked investment income (FII) against which the relief is due is restricted on a time basis.

Similar rules apply to claims in respect of:

  • capital allowances,

and

  • relief for losses on shares in unquoted companies.

Example

A company has excess capital allowances of £10,000 in the 9-month accounting period ended 31 December 1995. The company wants to carry these back to set against the £10,000 surplus FII of the 12 month accounting period ended 31 March 1995, under ICTA88/S242. However the claim under ICTA88/S242 cannot exceed nine-twelfths of the surplus FII of the year ended 31 March 1995. This is because the period in which the company incurred the excess capital allowances was only 9 months long while the FII relates to a 12-month period. Hence the maximum claim is 9 / 12 x 10,000 = £7,500.