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

Intra-group allocation of surplus shadow ACT

13.—(1) Where in respect of any accounting period of a company that is a member of a group at any time in that accounting period, there is an amount of surplus shadow ACT that has not been utilised as mentioned in regulation 12(7), the whole or part of that amount shall, for the purposes mentioned in regulation 11(1) and in accordance with the provisions of this regulation, be allocated by the parent company to another company, or other companies, that are members of the group (“the potential recipients”).

(2) Where an amount of surplus shadow ACT is allocated to another company in the group under paragraph (1), that amount shall be set against the balance (if any) of that company’s liability to corporation tax on any profits charged to corporation tax for an accounting period to which that amount is attributed in accordance with paragraph (8), that remains after the amount of that company’s shadow ACT in respect of its own distributions for that period (together with the amount of any surplus shadow ACT treated as belonging to that company under paragraph (6)) has been set against that liability in accordance with regulation 12(1), but not so as to reduce the amount of that liability or so as to exceed the capacity of that company to utilise that amount.

(3) No company that is a member of a group at any time in an accounting period shall be entitled to set an amount of unrelieved surplus ACT against its liability to corporation tax for that accounting period in accordance with regulation 14 until all surplus shadow ACT of that company for that period has been allocated under paragraph (1).

(4) Where the amount of surplus shadow ACT referred to in paragraph (1) is insufficient in relation to the capacity of all the potential recipients fully to utilise surplus shadow ACT, the parent company in the group shall determine the recipients to whom that amount shall be allocated under that paragraph, and the proportion of that amount to be allocated to each of those recipients in accordance with the capacity of each of those recipients to utilise that amount.

(5) Where the amount referred to in paragraph (1) exceeds the amount which could be utilised by all the potential recipients–

(a)so much of that amount as is able to be utilised by the potential recipients shall be allocated to them by the parent company under that paragraph in accordance with the capacity of each of the potential recipients to utilise that amount, and

(b)the balance shall, subject to paragraph (6), be retained by the company in which the amount arose and shall be treated by that company (in accordance with regulation 12(9)) as if it were shadow ACT which the company is treated as having paid in the next accounting period.

(6) Where, in a case to which paragraph (1) applies, the company concerned ceases to be a member of the group, otherwise than by reason of a transaction or arrangements between that company or that company’s immediate parent company (or the latter company’s immediate parent company and so on) and another person who is not connected with that company within the meaning of section 839(1), the amount of surplus shadow ACT shall be treated for the purposes of this regulation as belonging to the immediate parent company of that company at the time it ceases to be a member of the group or, where the immediate parent company ceases to be a member of the group at the same time as that company, as belonging to the next immediate parent company (and so on as necessary until an immediate parent company is found who has not ceased to be a member of the group at the same time as that company).

(7) An amount of surplus shadow ACT allocated to a company under paragraph (1) may subsequently be reallocated at any time under that paragraph, but not so as to reduce the amount allocated to a company to an amount below its capacity to utilise surplus shadow ACT after the time limit for amending that company’s tax return has expired.

(8) Where the whole or part of an amount of surplus shadow ACT is allocated to a company under paragraph (1), it shall be attributed to a relevant accounting period, or relevant accounting periods, of that company in the following order–

(a)an accounting period beginning and ending on the same dates as, or otherwise contained within, the accounting period of the company whose surplus shadow ACT is allocated (“the transferring company’s accounting period”);

(b)an accounting period beginning before, but ending in, the transferring company’s accounting period;

(c)an accounting period beginning in, but ending after, the end of the transferring company’s accounting period;

(d)any further period (whether the whole or part of an accounting period) beginning twenty four months or less prior to the end of the transferring company’s accounting period.

(9) In paragraph (8) “relevant accounting period” means an accounting period in which both the transferring company and the company receiving the amount were at some time members of the group.

(10) Where the further period referred to in paragraph (8)(d) is a part of an accounting period, the capacity of the company to utilise the amount attributed to that further period shall be proportionately reduced by reference to the part of its accounting period which falls outside that further period.

(11) Where in accordance with paragraph (8) amounts of surplus shadow ACT in respect of accounting periods of two or more companies are attributed to a relevant accounting period, or relevant accounting periods, of a company, the parent company in the group shall determine the order of priority in which those amounts are attributed, and the order of priority so determined shall apply on any subsequent reallocation of those amounts.

(12) Where a company is a member of more than one group and there is an allocation to that company under paragraph (1) of an amount of surplus shadow ACT by the parent company of more than one group, the order of priority in which allocations are attributed to an accounting period, or accounting periods, of that company in accordance with paragraph (8) shall be determined by reference to the date on which an allocation is made (an earlier allocation having priority over a later allocation).

(13) Where in accordance with paragraph (8) an amount falls to be attributed to an accounting period which is either the first or the last accounting period in which both the transferring company and the company receiving the amount were members of the group, then for the purpose of determining the amount to be attributed to that accounting period–

(a)the capacity of the company receiving the amount to utilise the amount to be attributed to that accounting period–

(i)shall be proportionately reduced by reference to the part of that period during which the transferring company and the company receiving the amount were not both members of the group, and

(ii)shall be further reduced by any prior attribution to that period by reason of the allocation to the company receiving the amount of the surplus shadow ACT of another company, and

(b)the amount shall be treated as attributable to a separate accounting period comprising the part of that accounting period during which both the transferring company and the company receiving the amount were members of the group.

(14) Where in accordance with paragraph (8) an amount is attributed to a relevant accounting period referred to in sub-paragraph (b) or (d) of that paragraph, that amount–

(a)shall displace any amount of unrelieved surplus ACT that, by virtue of regulation 14, was set against the company’s liability to corporation tax on any profits charged to corporation tax for that accounting period, but

(b)shall not displace any amount of surplus shadow ACT that, in accordance with regulation 12, has previously been set against that company’s liability for corporation tax for that accounting period or (as the case may be) has been treated as shadow ACT which that company is treated as having paid in respect of any relevant distributions made by the company in that accounting period.

(15) Where the parent company fails to allocate an amount of surplus shadow ACT in accordance with this regulation–

(a)that amount may be allocated in accordance with this regulation by an officer of the Board;

(b)if that amount is subsequently allocated by the parent company in accordance with this regulation, any allocation by an officer of the Board under sub-paragraph (a) shall be treated as if it had not been made.