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HMRC internal manual

Company Taxation Manual

From
HM Revenue & Customs
Updated
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ACT: General: Franked payments

ICTA88/S238 (1), (1A), (3), (5), ICTA88/S14 (1), (2), & (3), ICTA88/S241

A franked payment was:

  • the amount or value of a qualifying distribution other than an FID, plus
  • the ACT on the distribution.

The rate of ACT used was the rate in force for the financial year in which the distribution was made (see CTM20065).

FID were treated separately and did not give rise to franked payments.

Where the franked payments made by a company in any accounting period exceeded the franked investment income (CTM16120) received by it in that period, the company was liable to pay ACT. The ACT was calculated by reference to the amount of that excess (CTM22060).

Franked investment income used to cover franked payments for the purpose of arriving at the ACT payable was described as being used to frank distributions.

It was not possible to frank a distribution if the tax credit attached to the franked investment income had been paid to the company. If the franked investment income had been used in this way, it was not taken into account in determining whether the company had an excess of franked investment income over franked payments.

Where the franked investment income received in any accounting period exceeded the franked payments made in that accounting period, the surplus was carried forward and treated as received in the next accounting period. This surplus could then be used in computing the ACT due on franked payments made in the next accounting period. When working out this surplus, franked investment income that could not be used to frank was excluded.

The excess of franked investment income over franked payments could also be subject to:

  • a claim under ICTA88/S242 (set-off of losses etc against surplus franked investment income, see CTM16200),
  • a claim under ICTA88/S243 (set-off of loss brought forward or terminal loss, see CTM16200),

ICTA88/S242 and ICTA88/S243 were repealed by F2A97 for any accounting period beginning on or after 2 July 1997.