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Set-off of loss brought forward or terminal loss against franked investment income in the case of financial concerns.
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26.—(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 25, may on making a claim for the purpose require that the franked investment income shall be taken into account for relief under section 16 (1) or 18, 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 16 (6); and (subject to the restriction to the said amount of franked investment income) the following subsections shall have effect where the company makes a claim under this section for any accounting period.
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(2) The amount to which the claim relates shall for the purposes of the claim be treated as trading income of the accounting period.
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(3) The reduction falling 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:
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Provided that where the claim is made under section 18—
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(a) the loss in 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 18 (1) and the set-off of 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 the provisions of section 18 (1); so that the set-off against franked investment income of such balance of loss as is referred to above shall be effected in a later rather than an earlier accounting period falling within the three years mentioned in section 18 (1); and
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(b) where the aggregate of the tax credits comprised in the total amount of the franked investment income of an accounting period exceeds the aggregate of the tax credits comprised in the franked payments made in that accounting period, then the payment of tax credit to the company shall not exceed a sum equal to the excess; and for this purpose when the accounting period falls partly outside the three years mentioned in section 18 (1) the said excess shall be the part of the excess for the whole of the accounting period proportionate to the part of the accounting period which falls within the said three years.
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(4) Where a company has obtained payment to it of a tax credit by virtue of this section on a claim under section 16 (1) and apart from such a claim a loss could be set off against or deducted from profits of a subsequent accounting period, then 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 the said year of assessment is equal to the amount of the said tax credit and this assessment shall be made not later than two years from the end of the subsequent accounting period.
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(5) If the claim relates to section 18 and an accounting period of the company falls partly outside the three years mentioned in subsection (1) of that section, then—
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(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
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(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 three years in question.
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(6) 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.
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