Finance Act 1995

18 (1) Chapter V of Part VI of the Taxes Act 1988 is amended as follows.

(2) In section 238(1) for the definition of “surplus of franked investment income” substitute—

““surplus of franked investment income” shall be construed in accordance with subsection (1A) below;”.

(3) After that subsection insert—

“(1A) For the purposes of this Chapter, a company has a surplus of franked investment income in an accounting period if the amount of the franked investment income of the company in that period exceeds the amount of the franked payments made by it in that period.

For the purposes of determining whether a company has such a surplus, or the amount of the surplus, franked investment income that cannot be used to frank distributions of the company shall be disregarded.”.

(4) For section 238(3) substitute—

“(3) References in this Chapter to using franked investment income to frank distributions of a company are to using the income in accordance with section 241(1) and Schedule 13 so as to relieve the company from, or obtain repayment of, advance corporation tax for which the company would otherwise be liable.”.

(5) In section 241(3) for the words from the beginning to “the excess” substitute “Where a company has a surplus of franked investment income for any accounting period, the surplus”.

(6) In section 241(5) omit the words from “(that is to say,” to “otherwise be liable)”.

(7) In section 242(1)(b) omit “for purposes of section 241(3)”.

(8) In section 242(9)—

(a) omit “by virtue of section 241(5)”, and

(b) for “a company” substitute “the company”.