CTM16240 | Distributions: impact on Corporation Tax: franked investment income under the ACT system abolished from 6 April 1999 - surplus - claims under ICTA88/S242 - order of set-off

ICTA88/S242 (3)

Reliefs must first have been set against profits chargeable to Corporation Tax. Only the unused balance could be set against surplus franked investment income (FII) under ICTA88/S242.

Losses on shares in unquoted companies had to be used under ICTA88/S573 against income chargeable to CT before being used under ICTA88/S242. ICTA88/S573 appears, following Tax Law Rewrite, at CTA10/S68 and the description is now ‘share loss relief’ - see VCM70100 onwards.

The effect of a claim under ICTA88/S242, which relates to accounting periods beginning before 2 July 1997, is to treat the surplus FII as augmenting the profits of the accounting period. Subject to ICTA88/S242 (3) the usual rules then apply to the order in which the available unused reliefs are used against the CT profits augmented by the surplus FII.