CTM02060 | Corporation Tax: computation of income: dividends and other distributions received
From HM Revenue & Customs · Company Taxation Manual
: distributions received on or after 1 July 2009
Dividends or other distributions received on or after 1 July 2009 from UK or overseas resident companies are chargeable to CT under (added by and SCH14) unless the distribution is exempt. Most distributions, including those from overseas-resident companies, as well as those from UK companies which were exempt under the previous rule outlined below, are now exempt. But note that distributions within paragraph E and paragraph F (non-dividend distributions comprising interest and other distributions out of assets in respect of non-commercial and special securities, see ) are not exempt: CTA09/S931D (b). See for more details on "dividend exemption" generally.
Distributions received before 1 July 2009
, for the short period before came into force, rewrote the rule formerly in ICTA88/S208, that dividends and other distributions received from a company resident in the UK before 1 July 2009 were exempt from the CT charge.
The excess of franked investment income received in an accounting period over franked payments made in that period was called 'surplus franked investment income'. For accounting periods beginning before 2 July 1997 surplus franked investment income could be treated for certain purposes as if it were profits chargeable to CT. See onwards.
Franked investment income was the aggregate of:
the amount or value of a distribution (other than a foreign income dividend (FID)) on which a tax credit is due,
and
the amount of that credit received by a company:
which is resident in the UK, and
which does not receive the income on behalf of, or in trust for, another person.
A franked payment was the sum of:
the amount or value of a qualifying distribution,
and
the proportion of its amount or value which corresponds to the rate of advance corporation tax (ACT) in force for the financial year when the distribution is made.
Distributions made after 5 April 1999 do not create franked payments for the payer, but still gave rise to franked investment income of the recipient which was, for instance, relevant to the calculation of small profits relief - see .