CTM16130 - Distributions: impact on Corporation Tax: franked investment income under the ACT system abolished from 6 April 1999 - use of

ICTA88/S208, ICTA88/S231 (2), ICTA88/S238 (1) and (1A), and ICTA88/S241 (1)

A company did not pay Corporation Tax on any franked investment income (FII) that it received.

The following repayment provisions apply to distributions made before 6 April 1999.

The company could not receive payment of the tax credit attaching to its FII, unless:

  • the company was wholly exempt from CT or only not exempt in respect of trading income (ICTA88/S231 (2)(a)), or
  • the distribution was one in relation to which exemption is given, other than under ICTA88/S208; this exemption could be specific or by way of a more general exemption from tax, (ICTA88/S231 (2)(b)), or
  • the FII is 'surplus FII' and the company made claims under ICTA88/S242 or ICTA88/S243 for accounting periods beginning before 2 July 1997, see CTM16200.

The FII received in an accounting period was set off against qualifying distributions made before 6 April 1999 (except any FIDs paid, see CTM22010) in the accounting period when calculating the ACT payable by the company for qualifying distributions made before 6 April 1999.   However, the FII taken into account in this way excluded any that was the subject of a claim under ICTA88/S231 (2).

Any FII the company set against qualifying distributions paid before 6 April 1999 for the purposes of determining, before that date, the amount of ACT due, could not later be used for the purposes of ICTA88/S231 (2).