CTM16200 | Distributions: impact on Corporation Tax: franked investment income under the ACT system abolished from 6 April 1999: surplus - claims under ICTA88/S242

ICTA88/S242 (1), (9), and ICTA88/S244 (1)

Surplus franked investment income (FII) was an excess of FII that a company had received over franked payments (FP) the company had made in the accounting period.

For accounting periods beginning before 2 July 1997, a company could claim under ICTA88/S242, see CTM16220, to treat the surplus as a like amount of profits within the charge to CT. What this meant in practice was that:

• certain unused reliefs (losses and so forth, see CTM16220 could be set against the surplus FII,

• the tax credit attached to the surplus FII was paid to the company, and

• the surplus FII (for ICTA88/SCH13 purposes) and unused reliefs carried forward to the next accounting period were reduced accordingly.

A claim under ICTA88/S242 excluded any surplus FII the company had brought forward from earlier accounting periods. It also excluded any FII that the company had set off against FP of a later accounting period. There is an example of a claim under ICTA88/S242 in CTM16210.

Special rules applied for claims involving FII of 1993-94, see CTM20535.

A company could make FP and receive FII on various dates throughout an accounting period. It may have been necessary to analyse these transactions by reference to the ICTA88/SCH13 return periods to find when surplus FII arose. This could havel been relevant in considering whether a surplus arose before or from 6 April where the rate of tax credit had changed, see CTM16215.