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

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Set off of unrelieved surplus ACT against liability to corporation tax on profits of a controlled foreign company apportioned to a company

20.—(1) In any case where–

(a)an amount of chargeable profits (“Chapter IV profits”) of a controlled foreign company is apportioned to a company resident in the United Kingdom under the provisions of Chapter IV of Part XVII of the Taxes Act, and

(b)the company to whom the amount is apportioned has an amount of surplus shadow ACT, calculated in accordance with regulation 12 and (where applicable) regulation 13, available to be set against the company’s liability to corporation tax for the appropriate accounting period (including, by virtue of regulation 3(3), its liability to tax under section 747(4)(a) for that period),

then so much of that amount as does not exceed the relevant maximum shall be set against the company’s liability to tax under that section in respect of the Chapter IV profits.

(2) So much of any unrelieved surplus ACT of the company as does not exceed the relevant amount may be set against the company’s liability to tax in respect of the Chapter IV profits.

(3) Where–

(a)the whole of the amount of the company’s surplus shadow ACT has not been set off against the company’s liability to tax as mentioned in paragraph (1), and

(b)the company is a member of a group,

the part of that amount that has not been so utilised may be allocated by the parent company to any other company in the group to whom an amount of Chapter IV profits has been apportioned, and the provisions of this regulation shall apply accordingly to that other company.

(4) In this regulation–

(a)“the appropriate accounting period” has the same meaning as in paragraph 1 of Schedule 26(1);

(b)“the relevant amount” is the amount (if any) which is the difference between the amount of the relevant maximum and the amount of surplus shadow ACT set against the company’s liability in respect of the Chapter IV profits in accordance with paragraph (1);

(c)“the relevant maximum” is the amount calculated in accordance with the formula–

C - D

where–

  • C is 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 the company’s appropriate accounting period of an amount which, together with the shadow ACT treated as paid in respect of it, is equal to the amount calculated in accordance with the formula specified in paragraph (5), and

  • D is the portion of the controlled foreign company’s creditable tax (if any) which is apportioned to the company for that accounting period as mentioned in section 747(4)(a).

(5) The formula specified in this paragraph is–

E - F

where–

  • E is the amount of the Chapter IV profits on which the company is chargeable to corporation tax for the appropriate accounting period, and

  • F is the total of any relevant allowances which are to be regarded, by virtue of paragraph 1(5) of Schedule 26, as having been allowed as a deduction against the company’s profits together with any such additional amount as would fall to be so regarded if a claim under paragraph 1(1) of Schedule 26 were made in respect of all relevant allowances that are available under that paragraph.

(1)

Paragraph 1 of Schedule 26 was amended by paragraph 53 of Schedule 14, and Part V(3) of Schedule 41, to the Finance Act 1996, and by paragraph 46 of Schedule 5, paragraph 34 of Schedule 17 and Part III(27) of Schedule 27, to the Finance Act 1998.

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