Commentary

D5.161 Calculation and utilisation of shadow ACT

Corporate tax
Corporate tax | Commentary

D5.161 Calculation and utilisation of shadow ACT

Corporate tax | Commentary

D5.161 Calculation and utilisation of shadow ACT

Part of the calculation for the utilisation of surplus ACT involves the calculation of shadow ACT which broadly represents the situation had the ACT rules, which were abolished in 1999, continued, see D5.160.

The computation of shadow ACT capacity is performed by calculating the amount of any relevant distribution, deducting qualifying investment income and calculating shadow ACT on the net difference as detailed below.

Relevant distributions for shadow ACT

Where a company makes a relevant distribution (ie a distribution made after 5 April 1999), it is treated, for the purposes of relief for unrelieved surplus ACT, and for no other purpose, as having paid shadow ACT in respect of that distribution1. Shadow ACT is treated as having been paid at 25% of the amount or value of the distribution2.

This does not apply to a manufactured dividend paid by a dividend manufacturer (see D9.706), or, in general, to a distribution to another company in the same group3 but see D5.163.

Qualifying investment income for shadow ACT

Qualifying investment income is an exempt ABGH distribution grossed up by ten-ninths4. An exempt ABGH distribution is a distribution that5:

  1.  

    •     falls within CTA 2010, s 1000(1)(para A, B, G or H); see D5.102; essentially this covers any dividend/distribution paid by a company, any distribution arising as a result of a transfer of assets by a company to its members at below market value and any amount that is treated as a distribution as a result of a bonus issue following

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