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Finance Act 1965

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62Set-off of losses etc. against franked investment income

(1)Where a company has a surplus of franked investment income for any year of assessment, the company may claim that the amount of the surplus shall for all or any of the purposes mentioned in subsection (2) below be treated as if it were a like amount of profits chargeable to corporation tax, and subject to subsection (4) below those provisions shall apply in accordance with this section to reduce the amount of the surplus for purposes of section 48 of this Act so that income tax shall be repayable accordingly.

(2)The purposes for which a claim may be made under subsection (1) above are those of—

(a)the deduction of charges on income under section 52 of this Act;

(b)the deduction of expenses of management under section 57 of this Act;

(c)the setting of certain capital allowances against total profits under section 56(6) of this Act;

(d)the setting of trading losses against total profits under section 58(2) of this Act.

(3)Where a company makes a claim under this section for any year of assessment, then—

(a)the amount to which the claim relates shall for purposes of the claim be treated as profits of the accounting period or periods comprising or together comprising that year, and shall be apportioned between them (if more than one) in proportion to the parts of the year respectively comprised in them;

(b)the reduction falling to be made in profits of an accounting period shall be made as far as may be in profits chargeable to corporation tax rather than in the amount treated as profits so chargeable under this section.

(4)Where a claim under this section relates to section 56(6) or 58(2) and an accounting period of the company falls partly before and partly after the time mentioned in that subsection, then—

(a)the restriction imposed by section 56(7) or 58(3) on the amount of the relief shall be applied only to any relief to be given apart from this section, and shall be applied without regard to any amount treated as income of the period under this section; but

(b)relief under this section shall be given only against so much (if any) of the amount so treated as would under subsection (3) (a) above be apportioned to the part of the period falling after the said time if that part were a separate accounting period.

(5)Where—

(a)on a claim made under this section for any year of assessment relief is given in respect of the whole or part of any loss incurred in a trade, or of any amount which could be treated as a loss under section 58(8) of this Act; and

(b)in a later year of assessment the distributions on which the company pays the income tax under section 47(3) of this Act exceed its franked investment income;

then (unless the company has ceased to carry on the trade or to be within the charge to corporation tax in respect of it) the company shall, for purposes of section 58(1) of this Act, be treated as having, in the accounting period ending at or last before the beginning of the later year of assessment, incurred a loss equal to whichever is the lesser of—

(i)the excess referred to in paragraph (b) above ; and

(ii)the amount in respect of which relief was given as aforesaid, or so much of that amount as remains after deduction of any part of it dealt with under this subsection in relation to an earlier year of assessment.

(6)Subsection (5) above shall apply, with the necessary adaptations.—

(a)in relation to relief given in respect of management expenses; and

(b)in relation to relief given in respect of capital allowances ;

as it applies in relation to relief given in respect of a loss (the reference to the company ceasing to be within the charge to corporation tax in respect of the trade being construed as a reference to its ceasing to be within that charge at all):

Provided that any amount which may be dealt with under subsection (5) as a loss shall be so dealt with rather than under this subsection, except in so far as the company concerned otherwise elects.

(7)Where a company has a surplus of franked investment income in any year of assessment, the company, instead of or in addition to making a claim under subsection (1) above, may claim that the surplus shall be taken into account for relief under section 58(1) or under section 59 of this Act, up to the amount of franked investment income for the year which, if chargeable to corporation tax, would have been so taken into account by virtue of section 58(7); and where the company makes a claim under this subsection, then (subject to the restriction to the said amount of franked investment income)—

(a)if the claim relates to section 58(1), subsections (3) and (5) of this section shall apply in relation to it, with the substitution in subsection (3) of references to trading income for the references to profits; and

(b)if the claim relates to section 59, subsections (3) and (4) of this section shall apply in relation to it, with .the like substitution in subsection (3) and with the substitution in subsection (4) of a reference to section 59(1) for the reference to section 56(6) or 58(2) and of a reference to section 59(2) for the reference to section 56(7) or 58(3).

(8)For the purposes of a claim made under this section for any year of assessment the surplus of franked investment income for any year of assessment shall be calculated without regard to the part, if any, carried forward from an earlier year of assessment.

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