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as the U.K. Subs.), which are corporations organized and existing
under the laws of the United Kingdom.
During 1992, a corporation that resided in the United
Kingdom was required to pay tax to the United Kingdom at the rate
of 33 percent on its corporate income (mainstream tax). See
Finance (No. 2) Act, 1992, sec. 21. Additionally, a corporation
that paid a dividend to its shareholders was obligated to pay to
the United Kingdom ACT. See Income and Corporation Taxes Act,
1988, sec. 14(1) (Eng.)
Generally, upon payment of the ACT, a U.K. corporation
becomes entitled to a credit against mainstream tax equal to the
amount of the ACT (corporate offset). See id. sec. 239(1). If
the corporate offset exceeds the amount of the corporation's
mainstream tax, the corporation can carry the corporate offset
back 6 years or forward indefinitely. See id. sec. 239(3) and
(4). A corporation that cannot use the corporate offset in the
current year, rather than carrying the corporate offset back or
forward, can elect to allocate the corporate offset to one or
more of its controlled subsidiaries.4 See id. sec. 240 (1)
One exception to the general terms of the ACT is that a
corporation is not required to pay ACT on "franked investment
4 A subsidiary is controlled if the parent corporation owns
more than 51 percent of the outstanding stock. See Income and
Corporation Taxes Act, 1988, sec. 240(10).
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