Where a company ceases to be a member of a group, shadow ACT is computed as if the part of the accounting period before it ceased to be a member and the part after were two separate accounting periods.
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 | ||
| + Shadow ACT | £2,000 | ||
| Franked distribution | £10,000 | £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 | ||
| + Surplus FII | £46,000 | £73,000 | |
| Excess | £27,000 |
Shadow ACT is 25% of the amount which, when the shadow ACT is added to it, is equal to the excess = £5,400.
