The UK government will abolish the shadow Advance Corporation Tax (ACT) system from April 2026, allowing companies to apply existing ACT balances against current tax liabilities without complex calculations.
The UK government will abolish the shadow Advance Corporation Tax (ACT) system from April 2026, streamlining the way businesses can use their existing ACT balances.
Shadow Advance Corporation Tax (Shadow ACT) is a UK notional tax mechanism introduced on 6 April 1999 after the abolition of Advance Corporation Tax (ACT). It limits how quickly companies can reclaim surplus ACT paid before 1999 by requiring them to calculate a notional ACT amount. This “shadow” amount acts as a cap, ensuring surplus ACT is offset against corporation tax only at a rate broadly equivalent to the former ACT system.
Under the reform, companies will be able to offset remaining surplus ACT against current tax liabilities without the previous complex calculations.
The policy aims to reduce administrative burdens on businesses and modernise the tax code by removing outdated legislation. Officials expect the change to have only a minor impact on public finances and do not anticipate any significant effects on the wider economy or individual taxpayers.
Fewer than 100 companies are expected to benefit from the new procedures, which focus on simplifying capital recovery rather than enforcing intricate regulatory compliance. By providing a faster route for corporations to utilise long-standing tax credits, the reform is framed as a step toward regulatory simplification.
This announcement was made on 6 March 2026.
