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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 - order of set-off

ICTA88/S242 (3)

Reliefs must first be set against profits chargeable to CT. Only the unused balance can be set against surplus franked investment income (FII) under ICTA88/S242.

Losses on shares in unquoted companies must be used under ICTA88/S573 against income chargeable to CT before being used under ICTA88/S242. ICTA88/S573 appears, following Tax Law Rewrite, at CTA10/S68 and the description is now ‘share loss relief’ - seeVCM70100 and following.

The effect of a claim under ICTA88/S242, which relates to accounting periods beginning before 2 July 1997, is to treat the surplus FII as augmenting the profits of the accounting period. Subject to ICTA88/S242 (3) the usual rules then apply to the order in which the available unused reliefs are used against the CT profits augmented by the surplus FII.