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HMRC internal manual

International Manual

Reliefs against Controlled Foreign Companies' tax: ‘Relevant maximum’

The ‘relevant maximum’ is calculated as follows. Chargeable profits which are apportioned to the United Kingdom company and on which it is chargeable to tax are first reduced by the maximum amount of relevant allowances under ICTA88/SCH26/PARA1 (INTM256110 to INTM256160) that are available for set-off against Chapter IV liability (regardless of whether they are actually claimed). This appears in the regulations as the formula E - F, where E is the chargeable profits and F the maximum amount of relevant allowances. Relevant allowances which are used against other profits of the company are not available for set off. The amount of shadow ACT that would have been paid in respect of a distribution which, together with the shadow ACT paid in respect of it, equals the chargeable profits after these allowances is then reduced by any creditable tax apportioned to the company. This gives the relevant maximum and appears in regulations as the formula C - D where C is the shadow ACT that would have been paid on that distribution and D the creditable tax.

Once unrelieved surplus ACT has been set against Chapter IV liability it can no longer be relieved in any other way.

Where the whole of the company’s surplus shadow ACT has not been set off against the company’s liability to controlled foreign companies’ tax and the company is a member of a group the balance can be allocated by the parent to any other group member to whom a controlled foreign company’s profits have been apportioned.