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HMRC internal manual

Company Taxation Manual

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HM Revenue & Customs
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Shadow ACT: utilisation of: carry back

SI1999/358, Reg. 12 (7), (8), & (9)

Where, in respect of any accounting period, there is surplus shadow ACT, the amount is to be treated as if it were shadow ACT paid in respect of relevant distributions made by the company in any of its accounting periods, beginning on or after 6 April 1999 and in the six preceding years.

The surplus is to be set, so far as possible, against the liability for more recent before earlier accounting periods. The amount allocated to each earlier accounting period is limited to the available capacity except that, for the period beginning 24 months before the end of the accounting period for which the shadow ACT is to be carried back, it can displace unrelieved surplus ACT set against the company’s liability.

Example

A company has capacity for the accounting period for the period 1.1.2010 – 31.12.2010 of £1,000.

During that period it makes a distribution of £32,000 generating shadow ACT of £8,000.

It has unused unrelieved surplus ACT of £20,000.

The position for the accounting periods for the six previous years is:

Accounting        
period ended Capacity Shadow ACT    
unrelieved Surplus ACT      
         
31.12 2009 £1,000 £1,000    
31.12.2008 £1,000 £500 £500  
31.12.2007 £2,000 £2,000    
31.12.2006 £1,000 £1,000    
31.12.2005 £1,000 £1,000    
31.12.2004 £1,000 £500 £500  

The shadow ACT is set first against the liability for the accounting period ended 31.12.2010 (£1,000).

A further £1,000 is carried back to the accounting period ended 31.12.2009, displacing the unrelieved surplus ACT and increasing the company’s liability for that period by £1,000. The balance of £6,000 is carried forward. It cannot displace the unrelieved surplus ACT set against earlier years.

Where the accounting period to which shadow ACT is to be carried back began before but ended during the period of 24 months, the amount of unrelieved surplus ACT falling to be displaced is proportionately reduced by reference to the part of the accounting period falling outside the period of 24 months.

Example

A company has capacity for the accounting period for the period 1.1.2010 – 31.12.2010 of £1,000.

During that period it makes a distribution of £32,000 generating shadow ACT of £8,000.

It has unused unrelieved surplus ACT of £20,000.

The position for the accounting periods for the six previous years is:

Accounting        
period ended Capacity Shadow ACT    
unrelieved Surplus ACT      
         
31.12 2009 £1,000 £1,000    
30.06.2009 £1,000 £500 £500  
30.06.2008 £2,000 £2,000    
30.06.2007 £1,000 £1,000    
30.06.2006 £1,000 £1,000    
30.06.2005 £1,000 £500 £500  

The shadow ACT is set first against the liability for the accounting period ended 31.12.2010 (£1,000).

A further £1,000 is carried back to the accounting period ended 31.12.2009, displacing the unrelieved surplus ACT and increasing the company’s liability for that period by £1,000.

A further £250 is carried back to the accounting period ended 30.06.2009 displacing the shadow ACT utilised in the part of that accounting period falling within the 24 month period referred to in Regulation 12 (7).

This increases the company’s liability for that period by £250.

The balance of £5,750 is carried forward. It cannot displace the unrelieved surplus ACT set against earlier years.

Any remaining surplus is carried forward and treated as if it were shadow ACT paid in the next accounting period.