D5.162 Utilisation of surplus ACT
The basic rule is that a company's unrelieved surplus ACT is set against its mainstream corporation tax liability for an accounting period beginning after 5 April 19991. It must be set off as far as possible in the earliest such accounting period2. The corporation tax liability for this purpose includes liability in respect of an apportionment of the profits of a controlled foreign company3.
The amount which can be set against mainstream corporation tax liability for an accounting period cannot exceed the set-off limit for that period less the amount of any shadow ACT set off (see D5.161)4.
Omega Ltd makes up its accounts to 31 March.
At 31 March 2018 its unrelieved surplus ACT is £12,000. In the year to 31 March 2019 it has profits of £100,000 and pays a dividend of £60,000.
|Corporation tax at 19%||19,000|
|Set-off limit (£100,000 × 20%)||20,000|
|Less: Shadow ACT (£60,000 × 25%)||(15,000)|
|Available for unrelieved surplus ACT set off||(5,000)|
|Corporation tax payable||14,000|
At 1 April 2019 Omega Ltd still has unrelieved surplus ACT of £7,000 (£12,000 – £5,000), which can be carried forward.
Where the company is a member of a trading partnership and another partner receives any payment or benefit in respect of the company's share of partnership profits, no unrelieved surplus ACT may be set against the corporation tax on the company's share of partnership profits5.
Before 6 April 1999, a company could surrender all or part of its surplus ACT to a 51% subsidiary. Where the