Corporation Tax Act, 1976

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Surcharge on close company's undistributed investment and estate income.

101.—(1) Where for an accounting period of a close company, the aggregate of the distributable investment income and the distributable estate income exceeds the distributions of the company for the accounting period, there shall be charged on the company for the accounting period an additional duty of corporation tax (referred to hereafter in this section as a surcharge) amounting to 20 per cent. of the excess:

Provided that—

(a) a surcharge shall not be made on the company where the excess is equal to or less than the smaller of the following amounts—

(i) £500, or, if the accounting period is less than twelve months, £500 proportionately reduced, and

(ii) where the company has one or more associated companies, £500 divided by one plus the number of those associated companies, or, if the accounting period is less than twelve months, £500 proportionately reduced divided by one plus the number of those associated companies;

(b) where the excess is greater than the smaller amount on which by virtue of paragraph (a) a surcharge would not be made, the amount of the surcharge shall not be greater than a sum equal to four-fifths of the amount by which the excess is greater than that smaller amount.

(2) Where the aggregate of—

(a) the accumulated undistributed income of the company at the end of the accounting period, and

(b) any amount which, on or after the 27th day of November, 1975, was transferred to capital reserves or was used to issue shares, stock or securities as paid up otherwise than for new consideration (as defined in Part IX) or was otherwise used so as to reduce the amount referred to in paragraph (a),

is less than the excess referred to in subsection (1), that subsection shall apply as if the amount of that aggregate were substituted for the said excess.

(3) The provisions of section 28 (4) (5) (reduction of corporation tax liability of small companies) shall apply for the purposes of subsection (1) as they apply for the purposes of section 28 (3).

(4) If any amount on which a surcharge is made on a company under this section is distributed, the tax credit in respect of the distribution shall, except where otherwise provided, be that provided for by section 88 (tax credit for certain recipients of distributions).

(5) A surcharge made under this section on a company for an accounting period shall be paid in one instalment within two months from the making of the assessment.

(6) The provisions of section 6 (5) (general scheme of corporation tax) and of Part XIV (Administration) shall apply in relation to a surcharge made under this section as they apply to corporation tax charged otherwise than under this section.