The rate of ACT is fixed for a financial year by the relevant
Where the rate differs from the rate fixed for the preceding year, the effect of the provisions referred to in CTM22250 is as follows.
The amount of the franked payment and the amount of the tax
credit are calculated as if the rate of ACT were the rate fixed for
the previous financial year.
The company accounts for tax under ICTA88/SCH13 accordingly.
If an accounting period straddles 5 April, and the rate of ACT changes, you have to make sure that the following occur. Where:
treat (1) and (2) as two separate accounting periods for the
purposes of ICTA88/S241 (calculation of ACT where the company
receives franked investment income) and Schedule 13 only.
The consequences of this are as follows.
When working out the ACT up to 5 April, franked payments made in the notional accounting period to 5 April are set against franked investment income received or treated as received in that same period. Any excess of such franked investment income over the franked payments is to be carried forward to the notional accounting period commencing 6 April.
The ACT payable for the notional accounting period commencing 6 April is based on:
Franked investment income of the period from 6 April cannot be
set against franked payments of the period to 5 April.
The total of the ACT paid (and not repaid) arrived at in accordance with the above is the ACT paid for the whole of the straddling accounting period and is available for relief under ICTA88/S239 or ICTA88/S240.
A company had a 12 months accounting period to 31 May 1994. It
paid out distributions and received franked investment income
throughout its accounting period.
With effect from 6 April 1994 the rate of ACT changed from 9/31 to 1/4. As the accounting period straddles 5 April, and the rate of ACT changed, the consequences are as follows.
Return periods. A notional extra return period is needed.
1.6.93 to 30.6.93.
1.7.93 to 30.9.93.
1.10.93 to 31.12.93.
1.1.94 to 31.3.94.
1.4.94 to 5.4.94 to the end of the notional accounting period.
6.4.94 to 31.5.94.
ACT is computed on franked payments less franked investment income up to 5 April 1994. The rate used is 9/31.
ACT for the return period 6.4.94 to 31.5.94 is due on franked payments in that return period to 31.5.94 less the sum of franked investment income in that return period and surplus franked investment income brought forward from the return period ended 5.4.94.
The surplus franked investment income on hand at the end of the second notional accounting period is available for carry forward or for the purposes of ICTA88/S242 or ICTA88/S243 (the latter sections were repealed in relation to accounting periods beginning on or after 2 July 1997).