The Corporation Tax (Treatment of Unrelieved Surplus Advance Corporation Tax) Regulations 1999

Utilisation of shadow ACT

12.—(1) Shadow ACT which a company is treated as having paid in accordance with regulation 11 in respect of any relevant distribution made by it in an accounting period shall, for the purposes mentioned in regulation 11(1) and in accordance with the provisions of this regulation, be set against the company’s liability to corporation tax on any profits charged to corporation tax for that accounting period, but not so as to reduce the amount of that liability.

(2) Subject to paragraph (7)(b), shadow ACT shall be utilised as mentioned in paragraph (1) before any amount of unrelieved surplus ACT is set against a company’s liability to corporation tax in accordance with regulation 14.

(3) The amount of shadow ACT to be set against a company’s liability for any accounting period under paragraph (1)–

(a)shall not exceed the amount of shadow ACT that would have been treated as paid (apart from regulation 11(10) to (12)) in respect of a relevant distribution made at the end of that period of an amount which, together with the shadow ACT treated as paid in respect of it, is equal to the company’s profits charged to corporation tax for that period;

(b)shall be computed, where applicable, by reference to the like provisions with respect to separate accounting periods on a change of ownership of a company that are contained in regulations 16 and 17 for the purposes of computing the amount of unrelieved surplus ACT to be set against the company’s liability for an accounting period.

(4) Where an amount of credit for foreign tax falls to be allowed in accordance with section 797(1) against corporation tax attributable to any income or chargeable gain (“the relevant income or gain”), then–

(a)paragraph (3) shall have effect only in relation to so much of the company’s profits chargeable to corporation tax for the relevant accounting period as does not include the relevant income or gain;

(b)in so far as the company’s liability to corporation tax for the relevant accounting period relates to the relevant income or gain, it shall be taken to be reduced by the amount of the credit for foreign tax attributable to that income or gain, as determined in accordance with subsections (2) and (3) of section 797; and

(c)the amount of shadow ACT which may be set against that liability, so far as it relates to the relevant income or gain, shall not exceed whichever is the lower of the limits specified in paragraph (5).

(5) The limits specified in this paragraph are–

(a)the limit which would apply under paragraph (3) if the amount of the relevant income or gain, determined in accordance with subsection (3) of section 797, were the company’s only income or gain for the relevant accounting period; and

(b)the amount of corporation tax for which, after taking account of the reduction mentioned in paragraph (4)(b), the company is liable in respect of that income or gain.

(6) In paragraph (4) “the relevant accounting period” shall be construed in accordance with subsection (2) of section 797.

(7) Where in respect of any accounting period of a company (“the principal period”) there is an amount of surplus shadow ACT, that amount shall be treated as if it were shadow ACT which the company is treated as having paid in respect of relevant distributions made by it in any of its accounting periods beginning on or after 6th April 1999 and in the six years preceding the principal period, but so that that amount–

(a)is set, so far as possible, against the company’s liability for a more recent accounting period before a more remote one,

(b)does not cause the amount of shadow ACT specified in paragraph (3)(a) as respects an accounting period of the company to be exceeded,

(c)where the company is a member of a group, is not set against the liability of another company in the group for an accounting period, and

(d)except in relation to the period beginning twenty four months before the end of the principal period and ending the day before the commencement of the principal period, does not displace any amount of unrelieved surplus ACT that, by virtue of regulation 14, is set against the company’s liability for an accounting period.

(8) For the purposes of paragraph (7)–

(a)the reference to any of the company’s accounting periods beginning on or after 6th April 1999 includes a reference to a separate accounting period mentioned in regulations 16 and 17 beginning on or after that date;

(b)where an accounting period begins before, but ends during, the period of twenty four months referred to in sub-paragraph (d) of that paragraph, the amount of unrelieved surplus ACT falling to be displaced as mentioned in that sub-paragraph shall be proportionately reduced by reference to the part of that accounting period that falls outside the period of twenty four months.

(9) Subject to regulation 13 (intra-group allocation of shadow ACT), where in respect of any accounting period of a company there is an amount of surplus shadow ACT which has not been dealt with under paragraph (7), that amount shall be treated for the purposes of this regulation (including any further application of this paragraph) as if it were shadow ACT which the company is treated as having paid in the next accounting period.