INTM167350 - 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