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CTM18450 | Shadow ACT: accounting periods to which the Regulations apply: company not a member of a group: later opt out

From HM Revenue & Customs · Company Taxation Manual

A company may notify an officer of HMRC at any time in an accounting period that it wishes that accounting period to be its final accounting period and that it will not seek recovery of unrelieved surplus ACT in respect of any subsequent accounting period (later opt out).

Where such a notification is made, the accounting period in which it is made is the final accounting period unless:

  • there is an amount of surplus shadow ACT in respect of an accounting period beginning in the twelve months immediately following the end of the accounting period in which the notification is made or, if there is more than one, the latest accounting period, and

  • that amount or part of it falls to be carried back to the accounting period in which the notification is made,

in which case, that accounting period is the final accounting period.

Example 1

The company’s total liability for the accounting period of twelve months ending on 31.12.2005 is £200,000 at 30 per cent. No distribution is made during the accounting period and there is no surplus shadow ACT brought forward. v There is unrelieved surplus ACT of £40,100. The company opts out during the period.

Its total liability for the next accounting period ending on 31.12.2006 is £100,000 at 30 per cent. It makes a distribution of £80,000. The shadow ACT generated is £20,000, which matches its capacity in that period. There is no surplus shadow ACT so the final accounting period is that ending on 31.12.2005 and the unrelieved surplus ACT forgone is £100.

Example 2

The facts are the same as in Example 1 except that the distribution is £100,000.

The shadow ACT is £25,000 and the capacity £20,000 so £5,000 falls to be carried back to the accounting period in which the notification was made.

The final accounting period is the accounting period ending on 31.12.2006. The unrelieved surplus ACT that can be set against the CT liability for the accounting period ending on 31.12.2005 is £35,000. The unrelieved surplus ACT forgone is surplus ACT forgone is therefore £5,100.