Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

Company Taxation Manual

From
HM Revenue & Customs
Updated
, see all updates

Shadow ACT: computation of: company ceasing to be a member of a group

SI1999/358, Reg. 11 (7)

Where a company ceases to be a member of a group, shadow ACT is computed as if the part of the accounting period before it ceased to be a member and the part after were two separate accounting periods.

Example

Accounting Period 1.1.2005 – 31.12.2005.

Company makes a distribution of £8,000. It receives a dividend from a non-associated company which, with the tax credit, totals £32,000. It has surplus franked investment income (FII) brought forward of £20,000.

Accounting Period 1.1.2006 – 31.12.2006.

Company pays a dividend of £80,000. It receives a dividend from a non-associate, which with the tax credit totals £24,000.

Accounting Period 1.1.2005 – 31.12.2005, (calculation of surplus FII).

Surplus FII brought forward £20,000    
       
FII £32,000 x 9 / 8 =   £36,000  
  Total £56,000  
Less      
Distribution £8,000    
+ Shadow ACT £2,000    
Franked distribution £10,000 £10,000  
  Surplus FII £46,000  

Accounting Period 1.1.2006 – 31.12.2006, (calculation of shadow ACT).

Distribution   £80,000  
       
Shadow ACT thereon   £20,000  
Franked distribution   £100,000  
FII £24,000 x 9 / 8 = £27,000    
+ Surplus FII £46,000 £73,000  
Excess   £27,000  

Shadow ACT is 25% of the amount which, when the shadow ACT is added to it, is equal tothe excess = £5,400.