SolvedCTM18680 | Shadow ACT: utilisation of: carry back
From HM Revenue & Customs · Company Taxation Manual
SI1999/358 reg12 (7), (8) and (9)
Where, in respect of any accounting period (AP), there is surplus shadow ACT, the amount is to be treated as if it were shadow ACT paid in respect of relevant distributions made by the company in any of its APs beginning on or after 6 April 1999 and in the six preceding years.
The surplus is to be set, so far as possible, against the liability for more recent before earlier APs. The amount allocated to each earlier AP is limited to the available capacity except that, for the period beginning 24 months before the end of the AP for which the shadow ACT is to be carried back, it can displace unrelieved surplus ACT set against the company's liability.
Example
A company has capacity for the AP 1.1.2010 – 31.12.2010 of £1,000.
During that period it makes a distribution of £32,000 generating shadow ACT of £8,000.
It has unused unrelieved surplus ACT of £20,000.
The position for the APs for the six previous years is
| Accounting period ended | Capacity | Shadow ACT unrelieved | Surplus ACT |
|---|---|---|---|
| 31.12 2009 | £1,000 | £1,000 | - |
| 31.12.2008 | £1,000 | £500 | £500 |
| 31.12.2007 | £2,000 | £2,000 | - |
| 31.12.2006 | £1,000 | £1,000 | - |
| 31.12.2005 | £1,000 | £1,000 | - |
| 31.12.2004 | £1,000 | £500 | £500 |
The shadow ACT is set first against the liability for the AP ended 31.12.2010 (£1,000).
A further £1,000 is carried back to the AP ended 31.12.2009, displacing the unrelieved surplus ACT and increasing the company’s liability for that period by £1,000. The balance of £6,000 is carried forward. It cannot displace the unrelieved surplus ACT set against earlier years.
Where the AP to which shadow ACT is to be carried back began before but ended during the period of 24 months, the amount of unrelieved surplus ACT falling to be displaced is proportionately reduced by reference to the part of the AP falling outside the period of 24 months.
Example
A company has capacity for the AP 1.1.2010 – 31.12.2010 of £1,000.
During that period it makes a distribution of £32,000 generating shadow ACT of £8,000.
It has unused unrelieved surplus ACT of £20,000.
The position for the APs for the six previous years is:
| Accounting period ended | Capacity | Shadow ACT unrelieved | Surplus ACT |
|---|---|---|---|
| 31.12 2009 | £1,000 | £1,000 | - |
| 30.06.2009 | £1,000 | £500 | £500 |
| 30.06.2008 | £2,000 | £2,000 | - |
| 30.06.2007 | £1,000 | £1,000 | - |
| 30.06.2006 | £1,000 | £1,000 | - |
| 30.06.2005 | £1,000 | £500 | £500 |
The shadow ACT is set first against the liability for the AP ended 31.12.2010 (£1,000).
A further £1,000 is carried back to the AP ended 31.12.2009, displacing the unrelieved surplus ACT and increasing the company’s liability for that period by £1,000.
A further £250 is carried back to the AP ended 30.06.2009 displacing the shadow ACT utilised in the part of that AP falling within the 24 month period referred to in reg12 (7).
This increases the company’s liability for that period by £250.
The balance of £5,750 is carried forward. It cannot displace the unrelieved surplus ACT set against earlier years.
Any remaining surplus is carried forward and treated as if it were shadow ACT paid in the next AP.