INTM211100 - Reliefs against Controlled Foreign Companies' tax
Examples
Example 1
A company has surplus shadow ACT of £5,000 and
unrelieved surplus ACT of £50,000 which it wishes to set off
against its Chapter IV liability. An apportionment is due in
respect of chargeable profits of £100,000 and creditable tax
of £3,000. There are no relevant allowances to set against the
chargeable profits. CT is chargeable at 30% for the year.
The relevant maximum (C - D) is £17,000. This is arrived
at as follows:
| £ | |
| Shadow ACT on relevant distribution (C) £100,000 x 20% | 20,000 |
| Less: Creditable tax (D) | 3,000 |
| 17,000 |
Surplus shadow ACT of £5,000 is then set against this to give a ‘relevant amount’ of £12,000.
| £ | |
| Chargeable profits | 100,000 |
| Tax @ 30% | 30,000 |
| Less: Creditable tax | 3,000 |
| 27,000 | |
| Less: Unrelieved surplus ACT (limited to relevant amount) | 12,000 |
| Net tax payable | 15,000 |
The company now has unrelieved surplus ACT of £38,000
(£50,000 - £12,000) to carry forward.
Example 2
The facts are as in example 1 except that the company has
trading losses of £10,000 in respect of which it makes a claim
under ICTA88/SCH26/PARA1.
The relevant maximum is now £15,000 calculated as
follows:
The chargeable profits after set off of relevant allowances
(formula E - F) are £90,000.
| £ | |
| Shadow ACT on a relevant distribution (C) : £90,000 x 20% | 18,000 |
| Less: Creditable tax (D) | 3,000 |
| 15,000 |
Surplus shadow ACT of £5,000 is then deducted from this to give a ‘relevant amount’ of £10,000.
| £ | |
| Chargeable profits | 100,000 |
| Tax on chargeable profits @ 30% | 30,000 |
| Relief for relevant allowances in terms of tax £10,000 @ 30% | 3,000 |
| 27,000 | |
| Less: Creditable tax | 3,000 |
| 24,000 | |
| Less: Unrelieved surplus ACT (limited to relevant amount) | 10,000 |
| Net tax payable | 14,000 |
The company now has unrelieved surplus ACT of £40,000
(50,000 - £10,000) to carry forward.
Example 3
The facts are as in example 2, except that X makes no claim
under paragraph 1 of ICTA88/SCH26 in respect of a trading loss of
£10,000 which is not used elsewhere. The relevant amount
remains at £10,000 because the relevant maximum is calculated
as if the maximum reliefs under paragraph 1 of ICTA88/SCH26 were
set against the chargeable profits.
| £ | |
| Tax on chargeable profits @ 30% | 30,000 |
| Less: Creditable tax | 3,000 |
| 27,000 | |
| Less: Unrelieved surplus ACT | 10,000 |
| Net tax payable | 17,000 |
The company still has unrelieved surplus ACT of £40,000 (£50,000 - £10,000) to carry forward.
