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GLOSSARY

Advance corporation tax definition

Published by a LexisNexis Tax expert

What does Advance corporation tax mean?

An advance payment of corporation tax made by a company between 1973 and 1999 when it made dividend payments (or any other qualifying distributions) to its shareholders.

The ACT paid was imputed (in and after 1993, it was only partly imputed) to the shareholder and satisfied the shareholder's liability to pay the basic rate of income tax on the distributions. ACT paid by a company was set off against the company's liability to corporation tax. ACT was abolished with effect from 6 April 1999. A system of "shadow ACT" came into effect on the same date to give a measure of relief for any surplus ACT which had built up by that date and which had not been relieved.

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Tax consequences of share buybacks—main rules

Tax consequences of share buybacks—main rules A limited company is permitted to buy back shares that it has in issue, provided certain conditions set out in the Companies Act 2006 (CA 2006) are met. This is known as a share buyback or a ‘purchase of own shares’. In addition to the CA 2006 conditions, there are other rules and guidelines that apply to listed and AIM companies. In particular, a listed company must have regard to the UK Listing Rules (UKLR) and the Disclosure Guidance and Transparency Rules (DTR), and an AIM company, the AIM Rules. Any such companies may also need to take institutional investor guidelines into account. Note that the restrictions on buybacks that are contained in CA 2006 do not apply to unlimited companies. Unlimited companies are not discussed further in this subtopic. What are share buybacks? Why do a share buyback? Companies carry out share buybacks for a variety of reasons. One reason might be to return surplus cash to shareholders that...

IHT and close companies

IHT and close companies FORTHCOMING CHANGE: The newly elected Labour Government announced on 29 July 2024 that the government intends to replace the current (2024–25) domiciled-based assessment of inheritance tax with a new residence-based system from 6 April 2025, which would bring non-UK assets within the scope of IHT if the owner has been resident in the UK for ten tax years and keep them within the charge to IHT for ten years after that person ceases to be UK resident. Details of the new rules will be published at the Autumn Budget on 30 October 2024. When looking at the definition of chargeable transfers and transfers of value in the Inheritance Tax Act 1984 (IHTA 1984), it is perhaps not immediately apparent that inheritance tax (IHT) is not only chargeable on individuals. The wording of the sections in IHTA 1984 refers to: • 'transfer of value which is made by an individual' • 'disposition made by a person' IHTA 1984, Pt IV introduces two deeming provisions into...

Discover our 13 Practice Notes on Advance corporation tax

Share purchase agreement—cross-border

Share purchase agreement—cross-border This Agreement is made on [insert day and month] 20[insert year] Parties 1 [Insert name of selling corporate shareholder] incorporated in [England and Wales OR [insert country of incorporation]] with registered number [insert company number] whose registered office is at [insert address] (the Seller), and 2 [insert name of purchasing corporate entity] incorporated in [England and Wales OR [insert country of incorporation]] with registered number [insert company number] whose registered office address is at [insert address] (the Buyer), and 3 [Insert name of guarantor entity] incorporated in [England and Wales OR [insert country of incorporation]] with registered number [insert company number] whose registered office is at [insert address] (the Guarantor) [each of the Seller, the Buyer and the Guarantor being a Party and together the Seller, the Buyer and the Guarantor are the Parties.] Background (A) The Company (as defined below) is a private company limited by shares and is incorporated in [insert country of incorporation]....

Asset purchase agreement—pro-buyer—corporate seller—conditional—long form

Asset purchase agreement—pro-buyer—corporate seller—conditional—long form This Agreement is made on [insert day and month] 20[insert year] Parties 1 [insert name of selling corporate entity] a company incorporated in [England and Wales OR [insert country of incorporation]] under number [insert company number] whose registered office is at [insert address] (Seller), 2 [insert name of purchasing corporate entity] a company incorporated in [England and Wales OR [insert country of incorporation]] under number [insert company number] whose registered office is at [insert address] (Buyer), and 3 [Insert name of guarantor entity] incorporated in [England and Wales OR [insert country of incorporation]] under number [insert company number] whose registered office is at [insert address] (Guarantor) [(each of the Seller, the Buyer and the Guarantor being a Party and together the Seller, the Buyer and the Guarantor are the Parties).] BACKGROUND (A) The Seller currently carries on the Business[ under the Business Name]. (B) The Seller has agreed to sell the Business (including the Assets) as a going concern...

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Where a dividend payable by a company has been unclaimed for a period of more than 12 years so that, in accordance with its articles of association, it ceases to be owed to the intended recipient, what can the company do with the sums that represent that forfeited dividend?

Where a dividend payable by a company has been unclaimed for a period of more than 12 years so that, in accordance with its articles of association, it ceases to be owed to the intended recipient, what can the company do with the sums that represent that forfeited dividend? Once a final dividend is declared by a company (ie approved by its members) it becomes a debt that is immediately due from the company to its members and payment can be enforced, unless the terms of the approving resolution provide for it to be payable at a future date, in which case, it becomes a debt due only on that date; in contrast, the decision to pay an interim dividend is one for a company’s directors and no debt becomes due from the company to its members at the time that decision is made and payment cannot be enforced—a member’s right to an interim dividend does not arise until the dividend is actually paid (Burland v...

What is franked investment income (FII) and does it still matter?

What is franked investment income (FII) and does it still matter? It is in the context of the old advance corporation tax regime that FII is most often referred to, not least because of the very long running case called the FII Group Litigation Order. However, it does continue to be relevant because it can impact on the tax rate applicable. What is franked investment income? A UK resident company has franked investment income (FII) if it: • has income which consists of a distribution (for which, see: Scope of distributions for tax purposes), and • is entitled to a tax credit in respect of that distribution A UK resident company is entitled to a tax credit if the distribution in question is: • a qualifying distribution (which is broadly any distribution, whether made by a UK or non-UK resident company, other than certain distributions connected with the issue of redeemable shares or securities, for which, see: Paragraphs C and D—Redeemable share capital and securities), and • exempt...

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Tax weekly highlights—19 December 2024

This week's edition of Tax weekly highlights includes: (1) the House of Commons committee debating (but not amending) clauses of the Finance Bill 2025, (2) the NICs Bill passing the House of Commons stages without amendment, and (3) the Spring Forecast to be published on 26 March 2025.

AXA argues for group extension in foreign unit tax dispute

Law360: AXA told the Court of Appeal on 15 October 2024 that a limitation ruling in a test case against HMRC over taxes collected under a violation of EU law had a 'binding effect' on follower claims in a group litigation order.

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