SolvedCTM18600 | Shadow ACT: computation of: company ceasing to be a member of a group
From HM Revenue & Customs · Company Taxation Manual
SI1999/358 reg11 (7)
Where a company ceases to be a member of a group, shadow ACT is computed as if the part of the accounting period (AP) before it ceased to be a member and the part after were two separate APs.
Example
Accounting Period 1.1.2005 – 31.12.2005
Company makes a distribution of £8,000. It receives a dividend from a non-associated company which, with the tax credit, totals £32,000. It has surplus franked investment income (FII) brought forward of £20,000.
Accounting Period 1.1.2006 – 31.12.2006
Company pays a dividend of £80,000. It receives a dividend from a non-associate, which with the tax credit totals £24,000.
Accounting Period 1.1.2005 – 31.12.2005 (calculation of surplus FII)
| Surplus FII brought forward | £20,000 | ||
| FII £32,000 x 9/8 | £36,000 | ||
| Total | £56,000 | ||
| Less distribution | £8,000 | ||
| Plus shadow ACT | £2,000 | ||
| Franked distribution | £10,000 | ||
| Surplus FII | £46,000 |
Accounting Period 1.1.2006 – 31.12.2006 (calculation of shadow ACT)
| Distribution | £80,000 | |
| Shadow ACT thereon | £20,000 | |
| Franked distribution | £100,000 | |
| FII £24,000 x 9/8 | £27,000 | |
| Plus surplus FII | £46,000 | |
| £73,000 | ||
| Excess | £27,000 |
Shadow ACT is 25 per cent of the amount which, when the shadow ACT is added to it, is equal to the excess = £5,400.