Session 2014 - 15
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(9)    

Regulations under subsection (8) may—

 

(a)    

amend this section,

 

(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—equation: cross[over[times[char[U],char[R],char[O],char[S]],times[char[T],char[U]]],times[

num[7.5000000000000000,"7.5"],string["%"]]]

 

    

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—equation: plus[times[char[O],char[C]],times[char[C],char[E]]]

 

(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 way of a bargain

 

at arm’s length at the time it was first leased as mentioned in

 

subsection (10)(a), and


 
 

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(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—equation: cross[times[char[O],char[C]],over[plus[char[D],minus[times[char[D],char[B],char[

A]]]],char[D]]]

 

    

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—equation: times[char[C],char[E],cross[char[A],over[plus[char[D],minus[times[char[D],char[B],

char[I]]]],char[D]]]]

 

    

where—

 

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.


 
 

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(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

 

(b)    

appropriated to meeting expenditure to be so incurred by the

 

contractor.

 

(3)    

Subsection (1) does not apply, in the case of debits falling to be

 

brought into account as a result of section 329 of CTA 2009 (pre-loan

 

relationship and abortive expenses) in respect of a loan relationship

 

that has not been entered into, so far as the relationship would have

 

been one entered into for the purpose of borrowing money to be used

 

or appropriated as mentioned in subsection (2).


 
 

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(4)    

Subsection (1) does not apply, in the case of debits in respect of a loan

 

relationship to which Chapter 2 of Part 6 of CTA 2009 (relevant non-

 

lending relationships) applies, so far as—

 

(a)    

the payment of interest under the relationship is expenditure

 

incurred as mentioned in subsection (2)(a), or

 

(b)    

the exchange loss arising from the relationship is in respect of

 

a money debt on which the interest payable (if any) is, or

 

would be, such expenditure.

 

(5)    

If a debit—

 

(a)    

falls to be brought into account for the purposes of Part 5 of

 

CTA 2009 in respect of a loan relationship of the contractor,

 

but

 

(b)    

as a result of this section cannot be brought into account in a

 

way that results in any reduction of what would otherwise be

 

the contractor’s ring fence profits,

 

    

the debit is to be brought into account for those purposes as a non-

 

trading debit despite anything in section 297 of that Act.

 

(6)    

References in this section to a loan relationship, in relation to the

 

borrowing of money, do not include a relationship to which Chapter 2

 

of Part 6 of CTA 2009 (relevant non-lending relationships) applies.

 

356NC

Restriction on credits to be brought into account

 

(1)    

Credits in respect of exchange gains from the contractor’s loan

 

relationships may not be brought into account for the purposes of Part

 

5 of CTA 2009 (loan relationships) in any way that results in an

 

increase 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

 

(b)    

appropriated to meeting expenditure to be so incurred by the

 

contractor.

 

(3)    

Subsection (1) does not apply, in the case of credits falling to be

 

brought into account as a result of section 329 of CTA 2009 (pre-loan

 

relationship and abortive expenses) in respect of a loan relationship

 

that has not been entered into, so far as the relationship would have

 

been one entered into for the purpose of borrowing money to be used

 

or appropriated as mentioned in subsection (2).

 

(4)    

Subsection (1) does not apply, in the case of credits in respect of a loan

 

relationship to which Chapter 2 of Part 6 of CTA 2009 (relevant non-

 

lending relationships) applies, so far as—

 

(a)    

the payment of interest under the relationship is expenditure

 

incurred as mentioned in subsection (2)(a), or

 

(b)    

the exchange gain arising from the relationship is in respect of

 

a money debt on which the interest payable (if any) is, or

 

would be, such expenditure.

 

(5)    

If a credit—


 
 

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(a)    

falls to be brought into account for the purposes of Part 5 of

 

CTA 2009 in respect of a loan relationship of the contractor,

 

but

 

(b)    

as a result of this section cannot be brought into account in a

 

way that results in any increase of what would otherwise be

 

the contractor’s ring fence profits,

 

    

the credit is to be brought into account for those purposes as a non-

 

trading credit despite anything in section 297 of that Act.

 

(6)    

Section 356NB(6) applies for the purposes of this section.

 

Relief

 

356ND

Management expenses

 

No deduction under section 1219 of CTA 2009 (expenses of

 

management of a company’s investment business) is to be allowed

 

from the contractor’s ring fence profits.

 

356NE

Losses

 

Relief in respect of a loss incurred by the contractor may not be given

 

under section 37 (relief for trade losses against total profits) against the

 

contractor’s ring fence profits except so far as the loss arises from oil

 

contractor activities.

 

356NF

Group relief

 

(1)    

On a claim for group relief made by a claimant company in relation to

 

a surrendering company, group relief may not be allowed against the

 

claimant company’s contractor’s ring fence profits except so far as the

 

claim relates to losses incurred by the surrendering company that arose

 

from oil contractor activities.

 

(2)    

In section 105 (restriction on surrender of losses etc within section

 

99(1)(d) to (g)) the references to the surrendering company’s gross

 

profits of the surrender period do not include the company’s relevant

 

contractor’s ring fence profits for that period.

 

(3)    

The company’s “relevant contractor’s ring fence profits” for that

 

period are—

 

(a)    

if for that period there are no qualifying charitable donations

 

made by the company that are allowable under Part 6

 

(charitable donations relief), the company’s contractor’s ring

 

fence profits for that period, or

 

(b)    

otherwise, so much of the contractor’s ring fence profits of the

 

company for that period as exceeds the amount of the

 

qualifying charitable donations made by the company that are

 

allowable under section 189 for that period.

 

(4)    

In this section “claimant company” and “surrendering company” are

 

to be read in accordance with Part 5 (group relief) (see section 188).

 

356NG

Capital allowances

 

A capital allowance may not to any extent be given effect under

 

section 259 or 260 of CAA 2001 (special leasing) by deduction from

 

the contractor’s ring fence profits.”


 
 

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5          

In Schedule 4 (index of defined expressions), insert the following entries at the

 

appropriate places—

 

“associated

section 356LB”

 
 

person (in Part

  
 

8ZA)

  
 

“contractor (in

section

 
 

Part 8ZA)

356L(2)”

 
 

“contractor’s

section 356LD”

 
 

ring fence

  
 

profits (in Part

  
 

8ZA)

  
 

“exploration or

section

 
 

exploitation

356L(4)”

 
 

activities (in

  
 

Part 8ZA)

  
 

“lease (in Part

section 356LC”

 
 

8ZA)

  
 

“oil contractor

section

 
 

activities (in

356L(2)”

 
 

Part 8ZA)

  
 

“relevant asset

section 356LA”

 
 

(in Part 8ZA)

  
 

“relevant

section

 
 

offshore area

356L(5)”

 
 

(in Part 8ZA)

  
 

“relevant

section

 
 

offshore service

356L(3)”

 
 

(in Part 8ZA)

  

 
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