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HMRC internal manual

International Manual

From
HM Revenue & Customs
Updated
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UK residents with foreign income or gains: corporation tax: ACT and charges: examples (ACT abolished for accounting periods ending after 5 April 1999)

Example 1 - Allocation of ACT

Accounting period to 31 March 1999

  UK For. 1 For. 2 For. 3 For. 4 Total
             
  £’000 £’000 £’000 £’000 £’000 £’000
Income (after set-offs under ICTA88/S797(3)) 400 100        
(FT nil) 200
(FT 40%) 200
(FT 15%) 100
(FT 5%) 1,000            
  CT @ 31% 124 31 62 62 31 310
  DTR (Credit)     (62)      
(limit) (30)
(all) (5)
(all) (97)            
  CT after DTR 124 31   32 26 213
  ACT (Max 20% of income - Available 200) (80)          
(S239(2) limit) (20)
(S239(2) limit)   (32)
(lower limit) (20)

(S239(2) limit

  (152)            
  Mainstream CT 44 11     6 61

Example 2 - Foreign branch/allocation of charges/allocation of ACT

Accounting period to 31 March 1999

  £
   
Trading profits (of which £100,000 from foreign branch have borne foreign tax of £40,000) 300,000
Interest income 100,000
Charges 50,000
ACT 90,000
   
Computation:  
Case I 300,000
Case III 100,000
  400,000
Charges (50,000)
Charged to CT 350,000
CT on profits of £350,000 @ 31% 108,500
DTR (restricted to CT on branch profits) (31,000)
CT subject to ACT set-off 77,500
ACT (see below) (50,000)
Net CT due 27,500

Computation of ACT restriction under ICTA88/S797

  Case I
(Foreign Branch) Case I
(Domestic Component) Case III Total      
           
    £ £ £ £
  Profits 100,000 200,000 100,000 400,000
  Charges     (50,000) (50,000)
    100,000 200,000 50,000 350,000
  CT @ 31% 31,000 62,000 15,500 108,500
  DTR (31,000)     (31,000)
  CT subject to ACT   62,000 15,500 77,500
  ACT set-off   (40,000) (a) (10,000) (b) (50,000)
  Net CT   22,000 5,500 27,500
  1. CT limit 200,000 @ 20% = 40,000
  2. ACT limit 50,000 @ 20% = 10,000