Citation, commencement and effect

1.—(1) These Regulations may be cited as the Corporation Tax (Treatment of Unrelieved Surplus Advance Corporation Tax) (Amendment) Regulations 2026 and come into force on 26th March 2026.

(2) These Regulations have effect in relation to accounting periods ending on or after 1st April 2026.

Amendment of the Corporation Tax (Treatment of Unrelieved Surplus Advance Corporation Tax) Regulations 1999

2.—(1) The Corporation Tax (Treatment of Unrelieved Surplus Advance Corporation Tax) Regulations 1999(2) are amended as follows.

(2) Omit regulations 4, 5, 6A to 13, and 20 to 22.

(3) In regulation 2 (introductory), in paragraph (1), omit “, other than an accounting period that is subsequent to the company’s final accounting period”.

(4) In regulation 3 (interpretation)—

(a)in paragraph (1)—

(i)omit the following definitions—

(aa)“abnormal dividend”;

(bb)“company”;

(cc)“exempt ABGH distribution”;

(dd)“final accounting period”;

(ee)“franked distribution”;

(ff)“qualifying investment income”;

(gg)“relevant distribution”;

(hh)“shadow ACT”;

(ii)“straddling accounting period”;

(jj)“surplus qualifying investment income”;

(kk)“surplus shadow ACT”.

(ii)amend the following definitions—

(aa)in the definition of “distribution”, for “section 832(1)”, substitute “section 1119 of the CTA”(3);

(bb)in the definition of “parent company”, omit the words from “to (7)”, to the end;

(cc)in the definition of “unrelieved surplus ACT”, after “paragraph,”, for “would”, substitute “was”.

(iii)insert the following definitions in the appropriate places—

““Subsidiary” has the same meaning as in section 371(1) of the Corporation Tax Act 2009(4);”;

““Surrendering company” means a company that has paid an amount of corporation tax in respect of a dividend or dividends paid by it in an accounting period, that surrenders any part of the benefit of that amount;”;

““TIOPA” means the Taxation (International and Other Provisions) Act 2010(5);”,

(b)in paragraph (3), for “section 747(4)(a) (controlled foreign companies)”, substitute “Part 9A (controlled foreign companies) of the TIOPA.”, and

(c)omit paragraphs (4) and (7).

(5) In Regulation 6 (definition of a group)—

(a)in paragraph (1), omit “resident in an EEA state”,

(b)in paragraphs (2)(c) and 6(8), for “section 838”, substitute “section 1154 of the CTA”,

(c)in paragraph 3(b), for “section 838(1)(a)”, substitute “section 1154 of the CTA”, and

(d)omit paragraphs (4) to (7).

(6) After regulation 13 (intra-group allocation of surplus ACT), insert—

13A (extinguishment of shadow ACT)

13A. Any remaining balance of shadow ACT that a company has on 1st April 2026 is extinguished from that date.”.

(7) In Regulation 14 (set-off of unrelieved surplus ACT against liability to corporation tax)—

(a)in paragraph (1), for “(2) to”, substitute “(3) and”,

(b)omit paragraph (2),

(c)in paragraph (3), for “section 116(2)”, substitute “section 960 of the CTA”,

(d)for paragraph (4), substitute—

“(4) The amount of unrelieved surplus ACT(6) to be set against a company’s liability for an accounting period under paragraph (1) shall not exceed the sum of—

(e)after paragraph (4), insert—

“(4A) For the purpose of paragraph 4(b)—

(a)the “relevant percentage” is equivalent to the main rate of corporation tax for the financial year, or for each of the financial years, falling within the accounting period to which the set-off relates, and

(b)where the accounting period straddles more than one financial year, the profits are apportioned in accordance with section 1172 of the CTA.”, and

(f)in paragraph (5), for “section 116(3)” substitute “section 960(4) of the CTA”.

(8) In regulation 15 (restriction on set-off of company’s unrelieved surplus ACT against subsidiary company’s liability to corporation tax)—

(a)in paragraph (1)—

(i)after “subsidiary” the first time it appears, for “is” substitute “was”;

(ii)after “section 240(2)”, insert “of the Taxes Act”,

(b)in paragraph (2)—

(i)at the beginning of the paragraph, for “No”, substitute “For the purpose of paragraph (1), no”;

(ii)after “section 240(2)”, insert “of the Taxes Act”, and

(c)omit paragraph (3).

(9) In regulation 16 (calculation of unrelieved surplus ACT on change of ownership of company)—

(a)in paragraph (4), omit “by virtue of section 240(2)”, and

(b)omit paragraph (5).

(10) In regulation 17 (restriction on application of regulation 15 on change of ownership of company), in paragraph (1)(b), after “section 240(2)” insert “of the Taxes Act”.

(11) In regulation 18 (restriction on set-off under regulation 14 where asset transferred after change of ownership of company), in paragraph (2), after “treated”, omit “as”.