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CTM18430 | Shadow ACT: accounting periods to which the Regulations apply: company not a member of a group: unrelieved surplus ACT available for set off exhausted

From HM Revenue & Customs · Company Taxation Manual

The accounting period in which the shadow ACT is exhausted and after which no amount is available to be set against the company's liability to CT is referred to as the 'relevant accounting period'. The 'final accounting period' is the accounting period beginning in the period of twelve months immediately following the end of the relevant accounting period, or if there is more than one accounting period beginning in that period of twelve months, the latest of those accounting periods.

Example 1

A company’s total liability for the accounting period beginning on 1 January 2010 and ending on 31 December 2010 is £100,000 at 30 per cent. It makes no distribution. There is no surplus shadow ACT brought forward to that period and the unexhausted unrelieved surplus ACT is £20,000. In the accounting period covering the following twelve months it has a total liability of £200,000 at 30 per cent. It makes a distribution of £160,000. The amount of unrelieved surplus ACT that may be set-off against the liability for the accounting period ended 31.12. 2010 is calculated as follows:

  • Limit for set-off £20,000.

  • Less shadow ACT Nil.

  • Amount of unrelieved surplus ACT that can be set against liability £20,000.

  • The shadow ACT for the accounting period ended 31.12.2011 is £40,000. There is no shadow ACT to be carried back from the accounting period ended 31.12.2011.

  • Limit for set-off £40,000 – shadow ACT £40,000.

  • The accounting period ended 31.12.2011 is therefore the ‘final accounting period’.

Example 2

A company’s total liability for the accounting period beginning on 1 January 2010 and ending on 31 December 2010 is £100,000 at 30 per cent. It makes no distribution. There is no surplus shadow ACT brought forward to that period and the unexhausted unrelieved surplus ACT is £20,000. In the accounting period ended 31.12.2011 it has a total liability of £100,000 at 30 per cent. It makes a distribution of £160,000. The amount of unrelieved surplus ACT that may be set-off against the liability for the accounting period ended 31.12. 2010 is calculated as follows:

The shadow ACT to be carried back from the accounting period ended 31.12.2011 is:

  • Limit for set-off £20,000.

  • Less shadow ACT £40,000.

  • Carried back £20,000.

The shadow ACT carried back to the accounting period ended 31.12.2010 displaces the unrelieved surplus ACT set against the liability for that accounting period. The accounting period ended 31.12.2010 is revealed as not being ‘the relevant accounting period’ - the period in which the unrelieved surplus ACT was finally exhausted. As a result, the accounting period ended 31.12.2011 is not the final accounting period and the regulations continue to apply.