CTM03600 - Corporation Tax: small companies: definition of profits

ICTA88/S13 (7)

For the purpose of ICTA88/S13 and S13AA, the profits of a company for any accounting period are defined as:

• the profits for that period on which CT falls finally to be borne ( CTM20140),

plus

• the franked investment income received in that period other than franked investment income which the company (if a member of a group) receives from companies within the group,

plus

• prior to 6 April 1999, any FID arising to the company in that period.

For this purpose, from 6 April 1999 onwards, franked investment income is treated as received from within the group only if the dividends are paid by a 51% subsidiary of the recipient or of a company of which the receiving company is a 51% subsidiary or paid by a trading or holding company which does not fall within ICTA88/S13 (7A) and which is owned by a consortium the members of which include the receiving company.

Prior to 6 April 1999 franked investment income is treated as received from within the group only if the dividends are group income or would be group income if the companies so elected. This is so if the receiving company and the paying company have made or could make a joint election under ICTA88/S247 (1)(a) (51% subsidiaries) or ICTA88/S247 (1)(b) (members of a consortium) whereby the paying company could pay dividends to the receiving company without accounting for ACT (see CTM80070 and CTM80905).

If the franked investment income arose in 1993-94, see CTM20550.