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Interpretation
356J “Authorisation of development”: drilling and extraction sites

(1) References in this Chapter to authorisation of development of a site
are to be interpreted as follows in relation to a drilling and extraction
5site that is situated in, or used in connection with, a licensed area.

(2) The references are to be read as references to a national authority—

(a) granting a licensee consent for development of the licensed
area,

(b) serving on a licensee a programme of development for the
10licensed area, or

(c) approving a programme of development for the licensed
area.

(3) References in subsection (2) to a “licensee” are to a licensee in the
licensed area mentioned in subsection (1).

(4) 15In this section—

356JA 25 When capital expenditure is incurred

Section 5 of CAA 2001 (when capital expenditure is incurred) applies
for the purposes of this Chapter as for the purposes of that Act.

356JB Other definitions

In this Chapter (except where otherwise specified)—

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Restriction of field allowance to offshore fields

4 (1) Section 352 (meaning of “qualifying oil field”) is amended as follows.

(2) Renumber section 352 as subsection (1) of section 352.

(3) In section 352(1) (as renumbered), after “an oil field” insert “, other than an
5onshore field,”.

(4) After subsection (1) insert—

(2) An oil field is an “onshore field” for the purposes of subsection (1)
if—

(a) the authorisation day is on or after 5 December 2013, and

(b) 10on the authorisation day every part of the oil field is, or is part
of, an onshore licensed area;

but see the transitional provisions in paragraph 7 of Schedule 12 to
FA 2014.

(3) A licensed area is an “onshore licensed area” if it falls within the
15definition of “landward area” in the regulations pursuant to which
the application for the licence was made.

Part 2 Minor and consequential amendments

5 (1) CTA 2010 is amended as follows.

(2) 20In section 270 (overview of Part)—

(a) after subsection (7) insert—

(7A) Chapter 8 makes provision about the reduction of
supplementary charge by an allowance for capital
expenditure incurred for the purposes of onshore oil-related
25activities.;

(b) in subsection (8)(c), for “357” substitute “356AA”.

(3) In section 333 (reduction of adjusted ring fence profits)—

(a) in subsection (1), after “reduced” insert “(but not below zero)”;

(b) omit subsection (2).

(4) 30In section 356AA (as renumbered by paragraph 2)(definitions for Chapter 7),
in the definition of “adjusted ring fence profits”, at the end insert “; but see
also section 356DB (companies with allowances under Chapter 8 as well as
this Chapter)”.

(5) In Schedule 4 (index of defined expressions)—

(a) 35at the appropriate places insert—

adjusted ring fence profits (in Chapter
8 of Part 8)
section 356JB”;
“cumulative total amount of activated
allowance (in Chapter 8 of Part 8)
section 356JB”;

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“onshore allowance (in Chapter 8 of
Part 8)
section 356JB”;
“onshore oil-related activities (in
Chapter 8 of Part 8)
section 356BA”;
“relevant income (in Chapter 8 of Part 8) 5section 356E(3)”;
“site (in Chapter 8 of Part 8) section 356BC;

(b) in the entries for “adjusted ring fence profits”, “authorisation day”,
“eligible oil field”, “licensee” and “relevant income” (in each case, as
those expressions are defined for Chapter 7 of Part 8 of CTA 2010),
10for “357” substitute “356AA”.

Part 3 Commencement and transitional provision

Commencement of onshore allowance

6 (1) The amendments made by paragraphs 3 and 5(1), (2)(a), (3) and (4) have
15effect in relation to capital expenditure incurred on or after 5 December 2013.

(2) The amendments made by paragraph 4 have effect in relation to any
accounting period of a company in which a post-commencement
authorisation day falls.

(3) In sub-paragraph (2) “post-commencement authorisation day” means an
20authorisation day (as defined for Chapter 7 of Part 8 of CTA 2010) that is 5
December 2013 or a later day.

(4) Section 5 of CAA 2001 (when capital expenditure is incurred) applies for the
purposes of this paragraph as for the purposes of that Act.

Option to defer commencement

7 (1) 25This paragraph applies in relation to any oil field whose development (in
whole or in part) is authorised for the first time on or after 5 December 2013
but before 1 January 2015.

(2) At any time before 1 January 2015, the companies that are licensees in the oil
field may jointly elect that the law is to have effect in relation to each of those
30companies as if the date specified in—

(a) section 352(2)(a) of CTA 2010 (as inserted by paragraph 4(4) of this
Schedule),

(b) section 356C(3) of CTA 2010 (as inserted by paragraph 3 of this
Schedule), and

(c) 35paragraph 6(3),

were 1 January 2015.

(3) Expressions used in this paragraph and in Chapter 7 of Part 8 of CTA 2010
have the same meaning in this paragraph as in that Chapter.

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Straddling accounting periods

8 (1) Paragraphs 9 and 10 apply where a company has an accounting period (the
“straddling accounting period”) that begins before and ends on or after
commencement day.

(2) 5In paragraphs 9 and 10 “commencement day” means—

(a) 5 December 2013 (except where paragraph (b) applies);

(b) 1 January 2015, in relation to a company that makes an election under
paragraph 7.

(3) Expressions used in paragraph 9 or 10 and in Chapter 8 of Part 8 of CTA 2010
10(as inserted by paragraph 3) have the same meaning in the paragraph
concerned as in that Chapter.

9 (1) The amount (if any) by which the company’s adjusted ring fence profits for
the straddling accounting period are reduced under section 356D of CTA
2010 (as inserted by paragraph 3) cannot exceed the appropriate proportion
15of those profits.

(2) Section 356DA of CTA 2010 (carrying forward of activated allowance)
applies in relation to the company and the accounting period as if the
reference in subsection (1)(b) of that section to the adjusted ring fence profits
were to the appropriate proportion of those profits.

(3) 20The “appropriate proportion” of the company’s adjusted ring fence profits
for the s


traddling accounting period is—

where—

(4) 30If the basis of apportionment in sub-paragraph (3) would work unjustly or
unreasonably in the company’s case, the company may elect for its adjusted
ring fence profits to be apportioned on another basis that is just and
reasonable and specified in the election.

10 (1) For the purpose of determining the amount of activated allowance the
35company has with respect to any site—

(a) for the straddling accounting period (see section 356E of CTA 2010,
as inserted by paragraph 3), or

(b) for a reference period that is part of the straddling accounting period
(see section 356GB of CTA 2010, as so inserted),

40the company’s relevant income from the site in the straddling accounting
period is taken to be the appropriate proportion of the actual amount of that
relevant income.

(2) Accordingly, in relation to the company, the straddling accounting period
and the site in question, section 356EB of CTA 2010 (carrying forward of
45unactivated allowance) has effect as if Y in subsection (1) of that section were
defined as the appropriate proportion of the company’s relevant income for
the straddling accounting period from that site.

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(3) The “appropriate proportion” of the company’s relevant income from a site
in the straddling accounting period


is—

5where—

(4) If the basis of apportionment in sub-paragraph (3) would work unjustly or
unreasonably in the company’s case, the company may elect for its adjusted
ring fence profits to be apportioned on another basis that is just and
reasonable and specified in the election.

Section 68

15SCHEDULE 13 Partnerships

Part 1 Limited liability partnerships: treatment of salaried members

Main provision

1 20In Part 9 of ITTOIA 2005 (partnerships) after section 863 (limited liability
partnerships) insert—

863A Limited liability partnerships: salaried members

(1) Subsection (2) applies at any time when conditions A to C in sections
863B to 863D are met in the case of an individual (“M”) who is a
25member of a limited liability partnership in relation to which section
863(1) applies.

(2) For the purposes of the Income Tax Acts—

(a) M is to be treated as being employed by the limited liability
partnership under a contract of service instead of being a
30member of the partnership, and

(b) accordingly, M’s rights and duties as a member of the limited
liability partnership are to be treated as rights and duties
under that contract of service.

(3) This section needs to be read with section 863G (anti-avoidance).

863B 35 Condition A

(1) The question of whether condition A is met is to be determined at the
following times—

(a) if relevant arrangements are in place—

(i) at the beginning of the tax year 2014-15, or

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(ii) if later, when M becomes a member of the limited
liability partnership,

at the time mentioned in sub-paragraph (i) or (ii) (as the case
may be);

(b) 5at any subsequent time when relevant arrangements are put
in place or modified;

(c) where—

(i) the question has previously been determined, and

(ii) the relevant arrangements which were in place at the
10time of the previous determination do not end, and
are not modified, by the end of the period which was
the relevant period for the purposes of the previous
determination (see step 1 in subsection (3)),

immediately after the end of that period.

(2) 15“Relevant arrangements” means arrangements under which
amounts are to be, or may be, payable by the limited liability
partnership in respect of M’s performance of services for the
partnership in M’s capacity as a member of the partnership.

(3) Take the following steps to determine whether condition A is met at
20a time (“the relevant time”).

Step 1

Identify the relevant period by reference to the relevant
arrangements which are in place at the relevant time.

“The relevant period” means the period—

Step 2

30Condition A is met if, at the relevant time, it is reasonable to expect
that at least 80% of the total amount payable by the limited liability
partnership in respect of M’s performance during the relevant
period of services for the partnership in M’s capacity as a member of
the partnership will be disguised salary.

35An amount within the total amount is “disguised salary” if it—

(4) If condition A is determined to be met, or not to be met, at a time, the
condition is to be treated as met, or as not met, at all subsequent
times until the question is required to be re-determined under
45subsection (1)(b) or (c).

(5) In this section “arrangements” includes any agreement,
understanding, scheme, transaction or series of transactions
(whether or not legally enforceable).

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863C Condition B

Condition B is that the mutual rights and duties of the members of
the limited liability partnership, and of the partnership and its
members, do not give M significant influence over the affairs of the
5partnership.

863D Condition C

(1) Condition C is that, at the time at which it is being determined
whether the condition is met (“the relevant time”), M’s contribution
to the limited liability partnership (see sections 863E and 863F) is less
10than 25% of the amount given by subsection (2) (subject to subsection
(7)).

(2) That amount is the total amount of the disguised salary which, at the
relevant time, it is reasonable to expect will be payable by the limited
liability partnership in respect of M’s performance during the
15relevant tax year of services for the partnership in M’s capacity as a
member of the partnership.

In this section “the relevant tax year” means the tax year in which the
relevant time falls and an amount is “disguised salary” if it falls
within any of paragraphs (a) to (c) at step 2 in section 863B(3).

20In this section “the relevant tax year” means the tax year in which the
relevant time falls and an amount is “disguised salary” if it falls
within any of paragraphs (a) to (c) at step 2 in section 863B(3).

(3) The question of whether condition C is met is to be determined—

(a) at the beginning of the tax year 2014-15 or, if later, the time at
25which M becomes a member of the limited liability
partnership;

(b) after that, at the beginning of each tax year.

(4) If in a tax year—

(a) there is a change in M’s contribution to the limited liability
30partnership, or

(b) there is otherwise a change of circumstances which might
affect the question of whether condition C is met,

the question of whether the condition is met is to be re-determined at
the time of the change.

35This subsection is subject to section 863F(3).

This subsection is subject to section 863F(3).

(5) If condition C is determined to be met (including by virtue of
subsection (7)), or not to be met, at the relevant time, the condition is
to be treated as met, or as not met, at all subsequent times until the
40question is required to be re-determined under subsection (3)(b) or
(4).

(6) Subsection (7) applies if—

(a) the relevant time coincides with an increase in M’s
contribution to the limited liability partnership, and

(b) 45apart from subsection (7), that increase would cause
condition C not to be met at the relevant time.

(7) Condition C is to be treated as met at the relevant time unless, at that
time, it is reasonable to expect that condition C will not be met for the
remainder of the relevant tax year (ignoring this subsection).

(8) 50If there are any excluded days in the relevant tax year (see
subsections (9) to (11)), in subsection (1) the reference to M’s

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contribution to the limited liability partnership is to be read as a
reference to that contribution multiplied by the following fraction—


where—

(9) Any day in the relevant tax year—

(a) which is before the day on which the relevant time falls, and

(b) on which M is not a member of the limited liability
10partnership,

is an “excluded” day for the purposes of subsection (8).

(10) If, at the relevant time, it is reasonable to expect that M will not be a
member of the limited liability partnership for the remainder of the
relevant tax year, any day in the relevant tax year—

(a) 15which is after the day on which the relevant time falls, and

(b) on which it is reasonable to expect that M will not be a
member of the limited liability partnership,

is an “excluded” day for the purposes of subsection (8).

(11) If the relevant time coincides with an increase in M’s contribution to
20the limited liability partnership, any day in the relevant tax year—

(a) which is before the day on which the relevant time falls, and

(b) on which condition C is met,

is an “excluded” day for the purposes of subsection (8).

(12) In subsections (6) and (11) references to an increase in M’s
25contribution to the limited liability partnership include (in
particular)—

(a) the making of M’s first contribution to the capital of the
limited liability partnership, and

(b) M being treated as having made a contribution by section
30863F(2).

863E M’s contribution to the limited liability partnership: the basic
calculation

(1) For the purposes of condition C in section 863D M’s contribution to
the limited liability partnership at a time is amount A.

(2) 35Amount A is the total amount which M has contributed to the
limited liability partnership as capital less so much of that amount (if
any) as is within subsection (6).

(3) In particular, M’s share of any profits of the limited liability
partnership is to be included in the amount which M has contributed
40to the partnership as capital so far as that share has been added to the
partnership’s capital.

(4) In subsection (3) the reference to profits is to profits calculated in
accordance with generally accepted accounting practice (before any
adjustment required or authorised by law in calculating profits for
45income tax purposes).

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(5) Subsection (3) applies as well for the purpose of construing
references to contributions to the capital of the limited liability
partnership in sections 863D(12)(a) and 863F.

(6) An amount of capital is within this subsection if it is an amount
5which—

(a) M has previously drawn out or received back,

(b) M is or may be entitled to draw out or receive back at any
time when M is a member of the limited liability partnership,
or

(c) 10M is or may be entitled to require another person to
reimburse to M.

(7) In subsection (6) any reference to drawing out or receiving back an
amount is to doing so directly or indirectly.

863F M’s contribution to the limited liability partnership: deemed
15contributions

(1) This section applies if—

(a) by the time mentioned in section 863D(3)(a), M has given an
undertaking (whether or not legally enforceable) to make a
contribution to the capital of the limited liability partnership
20but has not made the contribution,

(b) the undertaking requires M to make the contribution by the
end of—

(i) the period of 3 months ending with 5 July 2014, or

(ii) if it ends after that date, the period of 2 months
25beginning with the date on which M becomes a
member of the limited liability partnership, and

(c) when it is made, the contribution will be included in amount
A under section 863E.

In the following subsections “the relevant period” means the period
30mentioned in paragraph (b)(i) or (ii) (as the case may be).

(2) For the purpose of determining whether condition C in section 863D
is met—

(a) at the time mentioned in section 863D(3)(a), or

(b) at any subsequent time during the relevant period,

35M is to be treated as having made the contribution at the time
mentioned in section 863D(3)(a) (so far as M has not (actually) made
the contribution at the time at which it is being determined whether
condition C is met).

(3) If M (actually) makes the contribution (in whole or in part) during
40the relevant period, the question of whether condition C is met is not
to be re-determined under section 863D(4) just because of the making
of the contribution (in whole or in part).

(4) If M does not (actually) make the contribution (in whole or in part)
by the end of the relevant period, any determination in relation to
45which subsection (2) applied is to be made again (as at the time at
which it was originally made).

(5) In making a determination again—

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(a) if it is the whole of the contribution which M does not make
by the end of the relevant period, subsection (2) is to be
ignored;

(b) if M makes part of the contribution by the end of the relevant
5period, in subsection (2) references to the contribution are to
be read as references to that part of it.

863G Anti-avoidance

(1) In determining whether section 863A(2) applies in the case of an
individual who is a member of a limited liability partnership, no
10regard is to be had to any arrangements the main purpose, or one of
the main purposes, of which is to secure that section 863A(2) does not
apply in the case of—

(a) the individual, or

(b) the individual and one or more other individuals.

(2) 15Subsection (4) applies if—

(a) an individual (“X”) personally performs services for a limited
liability partnership at a time when X is not a member of the
partnership,

(b) X performs the services under arrangements involving a
20member of the limited liability partnership (“Y”) who is not
an individual,

(c) the main purpose, or one of the main purposes, of those
arrangements is to secure that section 863A(2) does not apply
in the case of X or in the case of X and one or more other
25individuals, and

(d) in relation to X’s performance of the services, an amount
falling within subsection (3) arises to Y in respect of Y’s
membership of the limited liability partnership.

(3) An amount falls within this subsection if—

(a) 30were X performing the services under a contract of service by
which X were employed by the limited liability partnership,
and

(b) were the amount to arise to X directly from the limited
liability partnership,

35the amount would be employment income of X in respect of the
employment.

(4) If this subsection applies, in relation to X’s performance of the
services, X is to be treated on the following basis—

(a) X is a member of the limited liability partnership in whose
40case section 863A(2) applies,

(b) the amount arising to Y arises instead to X directly from the
limited liability partnership,

(c) that amount is employment income of X in respect of the
employment under section 863A(2) accordingly, and

(d) 45neither that amount, nor any amount representing that
amount, is to be income of X for income tax purposes on any
other basis.

(4A) Section 863A(2) does not apply in the case of a member of a limited
liability partnership if, apart from this subsection, it would apply in

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