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HMRC internal manual

Company Taxation Manual

From
HM Revenue & Customs
Updated
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ACT: tax credit & FA93: summary of main changes

The main changes introduced with effect from 6 April 1993 were as follows.

The rate at which ACT was accounted for on a distribution made:

  • between 6 April 1993 to 5 April 1994 inclusive fell from 1/3 to 9/31 (221/2/771/2) of the amount of the distribution, in other words 221/2% of the sum of the distribution and ACT.
  • from 6 April 1994 was linked to the lower rate of IT rather than to the basic rate. Thus a lower rate of 20% gave an ACT rate of 1/4 (20/80) of the amount of the distribution, or 20% of the sum of the distribution and ACT.

Income arising from distributions other than a FID was the sum of a distribution and tax credit, and was referred to as dividend income. Dividend income in the hands of a non-higher rate taxpayer was liable to IT at the lower rate and not the basic rate. Where the income was a FID, see CTM21160.

The tax credit carried by a distribution other than a FID was still equal to the ACT rate. However, for the purposes of computing the tax credit for 1993-94 the ACT rate was deemed to be 1/4 of the distribution (being 20% of the sum of the distribution and deemed ACT), although special rules applied in certain circumstances.