Income and Corporation Taxes Act 1988

430 Consequences of apportionment: ACT

(1) This section has effect where the income of a company is apportioned under section 423(1)(a); and in this section “the apportioned amount” means the aggregate of the amount of that income which is so apportioned (subject to subsection (2) below) and such proportion of the amount as corresponds to the rate of advance corporation tax applicable to a distribution made at the end of the accounting period to which the apportionment relates (“the relevant period”).

(2) Where a company issues to a close company any share capital to which section 249 applies, the amount of the company’s income apportioned under section 423(1)(a) shall, for the purposes of the definition of “apportioned amount” in subsection (1) above, be treated as reduced by an amount equal to the appropriate amount in cash (within the meaning of section 251(2)).

(3) If in the relevant period the company has a surplus of franked investment income, the surplus (so far as not already reduced in consequence of a claim under section 242 or 243 or of being used to frank distributions made by the company in a subsequent accounting period) shall be treated for all purposes as reduced by a sum equal to the apportioned amount or, if that is greater, as extinguished.

(4) If in the relevant period the company has no such surplus (so far as not already reduced as mentioned in subsection (3) above) or the apportioned amount exceeds that surplus (so far as not already so reduced), subsections (5) to (7) below shall have effect in relation to a sum equal to the advance corporation tax comprised in a franked payment made at the end of the relevant period of an amount equal to the apportioned amount or to that excess, as the case may be.

(5) If, apart from this section, surplus advance corporation tax of a later accounting period could by virtue of subsection (3) of section 239 be set against the company’s liability to corporation tax for the relevant period, that advance corporation tax shall not be so set except to such extent, if any, as would be possible if the sum mentioned in subsection (4) above had been advance corporation tax available to be so set against that liability for the relevant period and had, so far as permitted by that section, already been set against that liability.

(6) If the sum mentioned in subsection (4) above exceeds the amount that could, if it were advance corporation tax available for the purpose, be set as mentioned in subsection (5) above against the company’s liability for the relevant period—

(a) there shall be deducted from the excess an amount equal to the advance corporation tax, if any, that could by virtue of subsection (3) of section 239 be set against the company’s liability to corporation tax for earlier accounting periods after taking into account advance corporation tax so set in consequence of a claim already made under that subsection; and

(b) if no such claim has already been made, advance corporation tax shall not by virtue of any such claim be set against the company’s liability to corporation tax for any such earlier accounting periods except to such extent, if any, as would be possible if an amount equal to any deduction under paragraph (a) above had been advance corporation tax available to be so set and had, so far as permitted by section 239, already been set against that liability.

(7) Any excess of the sum mentioned in subsection (4) above remaining after the deduction mentioned in subsection (6)(a) above—

(a) shall be assessed on and recoverable from the company as if it were advance corporation tax payable by the company in respect of a distribution made by it at the end of the relevant period; and

(b) shall carry interest as if it were advance corporation tax so payable; and

(c) shall be treated as surplus advance corporation tax of the relevant period falling to be dealt with in accordance with section 239(4).

(8) Tax assessed by virtue of subsection (7)(a) above shall, subject to any appeal against the assessment, be due within 14 days after the issue of the notice of assessment.

(9) Subsection (7)(c) above shall not be construed as authorising any sum to be carried forward to a later accounting period in any case in which section 245 would prevent the carry-forward of advance corporation tax.

(10) Section 238 shall apply for the interpretation of this section as it applies for the interpretation of Chapter V of Part VI.