House of Commons Amendments

Session 2014 - 15
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Other Bills before Parliament

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3
In Chapter 4 of Part 8 (oil activities: calculation of profits), after section

285 insert—

“Hire of relevant assets

285A
Restriction on hire etc of relevant assets to be brought into account

(1)
This section applies if—

(a)
oil contractor activities are, or are to be, carried out, and

(b)
a company that carries on a ring fence trade makes, or is

to make, one or more payments under a lease of a

relevant asset, or part of a relevant asset, which is, or is to

be, provided, operated or used in the relevant offshore

service in question.

(2)
The total amount that may be brought into account in respect of

the payments for the purposes of calculating the company’s ring

fence profits in an accounting period is limited to the hire cap.

(3)
The “hire cap” is an amount equal to the relevant percentage of

TC for the accounting period, subject to subsection (4).

(4)
If payments in relation to which subsection (2) or section 356N(2)

(restriction on hire for oil contractors under Part 8ZA) applies are

also made, or to be made, by one or more other companies in

respect of the relevant asset or part, the “hire cap” is to be such

proportion of the amount mentioned in subsection (3) as is just

and reasonable, having regard (in particular) to the amounts of

the payments made, or to be made, by each company.

(5)
The “relevant percentage” and TC are to be determined in

accordance with section 356N(5) to (16).

(6)
To the extent that, by virtue of this section, payments within

subsection (1)(b) cannot be brought into account for the purposes

of calculating the company’s ring fence profits in an accounting

period, the payments may be—

(a)
allowed as a deduction from the company’s total profits

for the accounting period, or

(b)
treated as a surrenderable amount of the company for the

accounting period for the purposes of Part 5 (group relief)

(see section 99(7)) as if they were a trading loss,


but this is subject to subsection (7).

(7)
No deduction may be made by virtue of subsection (6) from total

profits so far as they are ring fence profits or contractor’s ring

fence profits.

(8)
If the company or an associated person enters into arrangements

the main purpose or one of the main purposes of which is to

secure that subsection (2) does not apply in relation to one or

more payments to any extent, that subsection applies in relation

to the payments to the extent that it would not otherwise do so.

(9)
In subsection (8) “arrangements” includes any agreement,

understanding, scheme, transaction or series of transactions

(whether or not legally enforceable).

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(10)
In this section—

“associated person” has the meaning given by section

356LB;

“contractor’s ring fence profits” has the meaning given by

section 356LD;

“oil contractor activities” and “relevant offshore service”

have the meaning given by section 356L;

“relevant asset” has the meaning given by section 356LA;

“lease” has the meaning given by section 868.”

4
After Part 8 (oil activities) insert—

Oil contractors

Introduction

356K
Overview of Part

(1)
This Part is about the corporation tax treatment of oil contractor

activities.

(2)
Chapter 2 contains basic definitions used in this Part.

(3)
Chapter 3 treats oil contractor activities as a separate trade.

(4)
Chapter 4 makes provision about the calculation of profits from

oil contractor activities.

(5)
For the meaning of oil contractor activities, see section 356L.

Basic definitions

356L
“Oil contractor activities” etc

(1)
The definitions in this section have effect for the purposes of this

Part.

(2)
“Oil contractor activities” means activities carried on by a

company (“the contractor”), which are not oil-related activities

(within the meaning of section 274), but are—

(a)
exploration or exploitation activities in, or in connection

with, which the contractor provides, operates or uses a

relevant asset (see section 356LA) in a relevant offshore

service, or

(b)
otherwise carried on in, or in connection with, the

provision by the contractor of a relevant offshore service.

(3)
The contractor provides a “relevant offshore service” if the

contractor provides, operates or uses a relevant asset in, or in

connection with, the carrying on of exploration or exploitation

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activities in a relevant offshore area by the contractor or any

other associated person.

(4)
“Exploration or exploitation activities” means activities carried

on in connection with the exploration or exploitation of the

seabed and subsoil and their natural resources.

(5)
“Relevant offshore area” means—

(a)
the territorial sea of the United Kingdom;

(b)
the areas designated by Order in Council under section

1(7) of the Continental Shelf Act 1964.

356LA
“Relevant asset”

(1)
In this Part “relevant asset” means an asset within subsection (2)

in respect of which conditions A and B are met.

(2)
An asset is within this subsection if it is a structure that—

(a)
can be moved from place to place (whether or not under

its own power) without major dismantling or

modification, and

(b)
can be used to—

(i)
drill for the purposes of searching for, or

extracting, oil, or

(ii)
provide accommodation for individuals who

work on or from another structure used in a

relevant offshore area for, or in connection with,

exploration or exploitation activities (“offshore

workers”).

(3)
But an asset is not within subsection (2)(b)(ii) if it is reasonable to

suppose that its use to provide accommodation for offshore

workers is unlikely to be more than incidental to another use, or

other uses, to which the asset is likely to be put.

(4)
In subsection (2)—

“oil” means any substance capable of being won under the

authority of a licence granted under Part 1 of the

Petroleum Act 1998 or the Petroleum (Production) Act

(Northern Ireland) 1964;

“structure” includes a ship or other vessel.

(5)
Condition A is that the asset, or any part of the asset, is leased

(whether by the contractor or not) from an associated person

other than the contractor.

(6)
Condition B is that the asset is of the requisite value.

(7)
The asset is of the “requisite value” if its market value is

£2,000,000 or more.

(8)
The Treasury may by regulations modify the meaning of

“requisite value”.

(9)
Regulations under subsection (8) may—

(a)
amend this section,

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(b)
make different provision for different cases or different

purposes, and

(c)
make incidental, consequential, supplementary or

transitional provision or savings.

356LB
“Associated person”

(1)
For the purposes of this Part each of the following is an

“associated person”—

(a)
the contractor,

(b)
any person who is, or has been, connected with the

contractor,

(c)
any person who has acted, acts or is to act, together with

the contractor to provide a service, and

(d)
any person who is connected with a person falling within

paragraph (b) or (c).

(2)
A person does not act together with the contractor to provide a

service by reason only of leasing an asset, to any person, which is

provided, operated or used in the service.

356LC
“Lease”

In this Part “lease” has the meaning given by section 868 and

“leased” and “leasing” are to be construed accordingly.

356LD
“Contractor’s ring fence profits”

In this Part the “contractor’s ring fence profits”, in relation to an

accounting period, means the contractor’s income arising from

oil contractor activities for that period.

Deemed separate trade

356M
Oil contractor activities treated as separate trade

If the contractor carries on oil contractor activities as part of a

trade, those activities are treated for the purposes of the charge to

corporation tax on income as a separate trade, distinct from all

other activities carried on by the contractor as part of the trade.

Calculation of profits

Hire of relevant assets

356N
Restriction on hire etc of relevant assets to be brought into account

(1)
This section applies if the contractor makes, or is to make, one or

more payments under a lease of—

(a)
a relevant asset, or

(b)
part of a relevant asset.

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(2)
The total amount that may be brought into account in respect of

the payments for the purposes of calculating the contractor’s ring

fence profits in an accounting period is limited to the hire cap.

(3)
The “hire cap” is an amount equal to the relevant percentage of

TC for the accounting period, subject to subsection (4).

(4)
If payments in relation to which subsection (2) or section 285A(2)

(restriction on hire for company carrying on a ring fence trade

under Part 8) applies are also made, or to be made, by one or

more other companies in respect of the relevant asset or part, the

“hire cap” is to be such proportion of the amount mentioned in

subsection (3) as is just and reasonable, having regard (in

particular) to the amounts of the payments made, or to be made,

by the contractor and each other company.

(5)
Subject to subsection (7), the “relevant percentage” is—


where—

UROS is the number of days in the accounting period that

the relevant asset is provided, operated or used in a

relevant offshore service, and

TU is the number of days in the accounting period that the

relevant asset is provided, operated or used (whether or

not in a relevant offshore service).

(6)
Accordingly, the relevant percentage is zero if the relevant asset

is not provided, operated or used in the accounting period.

(7)
If the accounting period is less than 12 months, the relevant

percentage is to be proportionally reduced.

(8)
TC is—

(9)
Unless subsection (11) applies, OC is the sum of—

(a)
any consideration given for the acquisition of the relevant

asset or part when it was first acquired by an associated

person, and

(b)
any expenses incurred by an associated person in

connection with that acquisition (other than the costs of

financing the acquisition).


This is subject to subsections (12) and (13).

(10)
Subsection (11) applies if the relevant asset or part—

(a)
is leased by an associated person from a person who is

not an associated person, and

(b)
has never been owned by an associated person.

(11)
OC is the sum of—

(a)
the consideration that it is reasonable to suppose would

have been given for the acquisition of the relevant asset or

part, if it had been acquired by an associated person by

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way of a bargain at arm’s length at the time it was first

leased as mentioned in subsection (10)(a), and

(b)
the expenses (other than the costs of financing the

acquisition) that it is reasonable to suppose would have

been incurred by an associated person in connection with

such an acquisition.


This is subject to subsections (12) and (13).

(12)
If the relevant asset or part was first acquired by an associated

person, or (as the case may be) first leased as mentioned in

subsection (10)(a), before the beginning of the accounting period,

OC does not include any part of the consideration mentioned in

subsection (9)(a) or (as the case may be) (11)(a) that it is

reasonable to attribute to anything that no longer forms part of

the relevant asset or part at the beginning of the accounting

period.

(13)
If the relevant asset or part was first acquired by an associated

person, or (as the case may be) first leased as mentioned in

subsection (10)(a), in the accounting period, OC for the

accounting period is—


where—

D is the total number of days in the accounting period,

DBA is the number of days in the accounting period before

the day on which the relevant asset or part was first

acquired or first leased, and

OC is the amount given by subsection (9) or (as the case may

be) (11).

(14)
CE is capital expenditure on the relevant asset or part (other than

capital expenditure in respect of its acquisition or the acquisition

of a lease of it) incurred by an associated person—

(a)
after it was first acquired by an associated person or (as

the case may be) was first leased as mentioned in

subsection (10)(a), and

(b)
before the end of the accounting period.


This is subject to subsections (15) and (16).

(15)
CE does not include any capital expenditure mentioned in

subsection (14) that is—

(a)
incurred before the beginning of the accounting period,

and

(b)
not reflected in the state or nature of the relevant asset or

part at the beginning of the accounting period.

(16)
If any capital expenditure mentioned in subsection (14) is

incurred on a day in the accounting period, the amount of CE for

the accounting period in respect of that capital expenditure is—


where—

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D is the total number of days in the accounting period,

DBI is the number of days in the accounting period before

the day on which that capital expenditure is incurred, and

CEA is the amount of that capital expenditure.

356NA
Restriction on hire: further provision

(1)
The Treasury may by regulations modify the “relevant

percentage” for the purposes of section 356N or 285A.

(2)
Regulations under subsection (1) may—

(a)
amend section 356N or section 285A,

(b)
make different provision for different cases or different

purposes, and

(c)
make incidental, consequential, supplementary or

transitional provision or savings.

(3)
To the extent that, by virtue of section 356N, payments within

subsection (1) of that section cannot be brought into account for

the purposes of calculating the contractor’s ring fence profits in

an accounting period, the payments may be—

(a)
allowed as a deduction from the contractor’s total profits

for the accounting period, or

(b)
treated as a surrenderable amount of the contractor for

the accounting period for the purposes of Part 5 (group

relief) (see section 99(7)) as if they were a trading loss,


subject to subsection (4).

(4)
No deduction may be made by virtue of subsection (3) from total

profits so far as they are contractor’s ring fence profits or ring

fence profits for the purposes of Part 8.

(5)
If an associated person enters into arrangements the main

purpose or one of the main purposes of which is to secure that

section 356N(2) does not apply in relation to one or more

payments to any extent, that provision applies in relation to the

payments to the extent it would not otherwise do so.

(6)
In subsection (5) “arrangements” includes any agreement,

understanding, scheme, transaction or series of transactions

(whether or not legally enforceable).

Loan relationships

356NB
Restriction on debits to be brought into account

(1)
Debits may not be brought into account for the purposes of Part

5 of CTA 2009 (loan relationships) in respect of the contractor’s

loan relationships in any way that results in a reduction of what

would otherwise be the contractor’s ring fence profits, but this is

subject to subsections (2) to (4).

(2)
Subsection (1) does not apply so far as a loan relationship is in

respect of money borrowed by the contractor which has been—

(a)
used to meet expenditure incurred by the contractor in

carrying on oil contractor activities, or



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