CTM35220 - Income Tax: deduction of tax: income received net
ICTA88/S7 (2) & (5) for CTPF accounting periods
FA98/SCH18/PARA9 & PARA57 for CTSA accounting periods
Following the changes in FA01 and FA02 (see CTM35215) companies will receive payments under deduction of tax much less frequently than before.
- However, where a UK company receives taxed payments they are treated as income for CT purposes.
- The amount of IT deducted from the payment received is set off against the CT liability (as reduced by ACT set-off where appropriate).
In this way the set-off is made against the total CT liability for the whole accounting period, and not just against CT attributable to the receipt.
If the net CT liability does not absorb the whole of the IT, the balance of the IT is repayable. For accounting periods ending before 1 October 1993, the balance of the IT is repayable only after the assessment for the accounting period is finally determined. For accounting periods ending on or after 1 October 1993, companies may claim repayment before the relevant assessment has been determined (see CTM92150).
Example
A company has £20,000 IT deducted from taxed income received in the accounting period ended 31 December 1996. The CT computation will show
| CT chargeable | £25,000 |
| less ACT | £6,000 |
| £19,000 | |
| IT set-off (£19,000 out of the £20,000) | £19,000 |
| CT Payable | Nil |
The £1,000 (£20,000 less £19,000 used) IT not so relieved is repaid to the company.
