First Previous (CHAPTER 6 Distributions — supplemental) Next (CHAPTER 8 Advance corporation tax)

39 1997

TAXES CONSOLIDATION ACT, 1997

CHAPTER 7

Franked investment income

Franked investment income and franked payments.

[CTA76 s24]

156. —(1) Income of a company resident in the State which consists of a distribution in respect of which the company is entitled to a tax credit (and which accordingly represents income equal to the aggregate of the amount or value of the distribution and the amount of that credit) shall be referred to in the Corporation Tax Acts as “franked investment income” of the company.

(2) The sum of the amount or value of a distribution made by a company resident in the State and the amount of the tax credit in respect of the distribution shall be referred to in the Corporation Tax Acts as “a franked payment”, and references to any accounting or other period in which a franked payment is made are references to the period in which the distribution in question is made.

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

[CTA76 s25(1) to (7); FA86 s55(1)(a); FA92 s49(1)]

157. —(1) Where in any accounting period a company receives franked investment income, the company may on making a claim for the purpose require that the franked investment income or part of the franked investment income shall for all or any of the purposes mentioned in subsection (2) be treated as if it were a like amount of profits chargeable to corporation tax and, subject to subsections (4) and (5), the company shall be entitled to have paid to it the value of the tax credit comprised in the income or in the part of the income so treated.

(2) The purposes for which a claim may be made under subsection (1) shall be—

(a) the deduction of charges on income under section 243 ;

(b) the setting of certain capital allowances against total profits under section 308 (4);

(c) the setting of trading losses against total profits under section 396 (2).

(3) Where a company makes a claim under this section for any accounting period, the reduction to be made in profits of that 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 308 (4) or 396 (2) and an accounting period of the company falls partly before and partly within the time mentioned in section 308 (4) or 396 (2), as the case may be, then—

(a) the restriction imposed by section 308 (4) or 396 (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 profits of the accounting period under this section; but

(b) relief under this section shall be given only against a part of the amount so treated proportionate to the part of the accounting period falling within the time mentioned in section 308 (4) or 396 (2), as the case may be.

(5) (a) Subject to paragraph (b), where a company has obtained payment of a tax credit on a claim under this section or under section 83 (5) and apart from such a claim any amount could be set off against or deducted from profits of a subsequent accounting period, the company may claim that the amount shall be so set off or deducted; but in that case, to the extent to which the amount was used to obtain payment of a tax credit, such tax credit shall be recoverable from the company by an assessment on it to income tax under Case IV of Schedule D for the year of assessment in which the subsequent accounting period ends on an amount the income tax on which at the standard rate for that year of assessment is equal to the amount of such tax credit.

(b) Relief under this subsection shall not be given against the profits of an accounting period if such relief could be given against the profits of an earlier accounting period.

(6) Where a company makes a claim under subsection (5) in respect of an accounting period, any income tax payable by virtue of that subsection shall, for the purposes of the charge, assessment, collection and recovery from the company of that tax and of any interest or penalties on that tax, be treated and described as corporation tax payable by that company for that accounting period, notwithstanding that for the other purposes of the Tax Acts it is income tax.

(7) The time limits for claims under this section shall be—

(a) if and in so far as the purpose for which the claim is made is the deduction of charges on income under section 243 or the setting of capital allowances against total profits under section 308 (4), 2 years from the end of the accounting period in which the charges were paid or the capital allowances were to be made;

(b) if and in so far as the purpose for which the claim is made is the setting of trading losses against total profits under section 396 (2), 2 years from the end of the accounting period in which the trading loss is incurred;

(c) if the claim is a claim under subsection (5), 2 years from the end of the accounting period in respect of which the claim is made.

(8) Any amount on which by virtue of this section income tax is charged on a company by an assessment under Case IV of Schedule D shall not be regarded as income of the company for any purpose of the Tax Acts.

Set-off of loss brought forward or terminal loss against franked investment income in the case of financial concerns.

[CTA76 s26; FA83 s51; FA86 s55(1)(a) and (b); FA92 s49(2)]

158. —(1) Where in any accounting period a company receives franked investment income, the company, instead of or in addition to making a claim under section 157 , may on making a claim for that purpose require that the franked investment income shall be taken into account for relief under section 396 (1) or 397 up to the amount of such income received in the accounting period which, if chargeable to corporation tax, would have been so taken into account by virtue of section 396 (6), and (subject to the restriction to the amount of franked investment income) subsections (2) to (7) shall apply where the company makes a claim under this section for any accounting period.

(2) For the purposes of the claim, the amount to which the claim relates shall be treated as trading income of the accounting period.

(3) (a) The reduction to be made in trading income of an accounting period shall be made as far as may be in trading income chargeable to corporation tax rather than in the amount treated as trading income so chargeable under this section.

(b) Where the claim is made under section 397 , the loss in the trade shall be set primarily against income chargeable to corporation tax (exclusive of income so treated as chargeable by this section) for the accounting periods referred to in section 397 (1), and the set-off of the loss against franked investment income provided for by this section shall apply to the balance only of such loss which has not been set off under section 397 (1) and the set-off against franked investment income of such balance of the loss as is referred to above shall be effected in a later rather than an earlier accounting period falling within the 3 years mentioned in section 397 (1).

(4) Where a company has obtained payment to it of a tax credit by virtue of this section on a claim under section 396 (1) and apart from such a claim a loss could be set off against or deducted from profits of a subsequent accounting period, the company may claim that the loss shall be so set off or deducted; but in that case, to the extent to which the loss was used to obtain payment of a tax credit, such tax credit shall be recovered from the company by an assessment on it to income tax under Case IV of Schedule D for the year of assessment in which the subsequent accounting period ends on an amount the income tax on which at the standard rate for that year of assessment is equal to the amount of such tax credit, and the time limit for a claim under this subsection shall be 2 years from the end of the subsequent accounting period.

(5) Where a company makes a claim under subsection (4) in respect of an accounting period, any income tax payable by virtue of that subsection shall, for the purposes of the charge, assessment, collection and recovery from the company of that tax and of any interest or penalties on that tax, be treated and described as corporation tax payable by that company for that accounting period, notwithstanding that for the other purposes of the Tax Acts it is income tax.

(6) Where the claim relates to section 397 and an accounting period of the company falls partly outside the 3 years mentioned in subsection (1) of that section—

(a) the restriction imposed by subsection (2) of that section on the amount of the reduction that may be made in the trading income of that period 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 trading income of the period by virtue of this section; but

(b) relief under this section shall be given only against a part of the amount so treated proportionate to the part of the accounting period falling within the 3 years in question.

(7) Any amount on which by virtue of this section income tax is charged on a company by an assessment under Case IV of Schedule D shall not be regarded as income of the company for any purpose of the Tax Acts.