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HMRC internal manual

Company Taxation Manual

ACT: tax credit & FA93: effects of main changes

The effects of the changes referred to at CTM20510 were:

  • for a non higher rate UK resident taxpayer the tax credit still matched the IT liability on the (non FID) dividend income,
  • from 6 April 1994 the link was restored between the rates of ACT, tax credit and lower rate IT liability on the (non FID) dividend income, but for the year 1993-94 there was no such link.

Because of the break in the link in 1993-94 it was necessary to make various legislative changes to ensure the existing tax code still worked correctly. These changes are outlined in subsequent pages.

The maximum amount of ACT that could be set against a company’s CT liability was governed by the rate of ACT (ICTA88/S239 (2), CTM20150).

Where the rate of ACT expressed by reference to the sum of the distribution and ACT was less than the small companies rate of CT, (as was the case from 6 April 1993), a company could not fully cover its CT liability with ACT set-off.

For an accounting period straddling 5 April a change in the rate of ACT meant that a company’s results had to be apportioned (ICTA88/S246 (5), CTM22260).