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HMRC internal manual

Company Taxation Manual

Shadow ACT: computation of: subsidiary with election under Regulation 11(3)

SI1999/358, Reg. 10 (2) - (4), Reg. 11 (3)

A company may elect to have an amount of a distribution made to another group member taken into account in computing its shadow ACT where it has franked investment income which would have reduced the amount treated as paid had shadow ACT been due in respect of group distributions. An election will not affect the amount of shadow ACT treated as paid by the company making the distribution. Its effect and the intention is that the distribution, to the extent that there is otherwise unused franked investment income to cover, will constitute franked investment income of the recipient company and be taken into account in computing its shadow ACT. The amount to which the election can apply is limited in order to forestall surplus shadow ACT being positioned in a company that is to be sold or artificially degrouped.

The election must be made within two years after the end of the accounting period and is irrevocable.