Finance (No. 3) Bill (HC Bill 282)

44 The total activated TTH amount for a loss period is to be allocated, for the
purposes of the application of paragraph 25 in relation to that loss period, to
pre-acquisition accounting periods of the purchaser as follows—

Step 1

5Take the most recent pre-acquisition accounting period for which there is an
unused transferred profits amount which is greater than nil.

Step 2

Allocate to that pre-acquisition accounting period an amount equal to the
lower of—

(a) 10the unused transferred profits amount, and

(b) the total activated TTH amount held by the purchaser for the loss
period.

Step 3

Allocate to the next most recent pre-acquisition accounting period an
15amount equal to the lower of—

(a) the transferred profits amount for that period, and

(b) the available activated TTH amount for the loss period.

Step 4

Repeat Step 3 (taking later pre-acquisition accounting periods before earlier
20 ones) until the amount given by paragraph (a) or (b) is nil.

Transferred profits amount for a pre-acquisition accounting period

45 (1) In this Schedule, references to the transferred profits amount for a pre-
acquisition accounting period of the purchaser are references to—

(a) the transferred profits amount for the accounting period of the seller
25which coincides with the pre-acquisition accounting period of the
purchaser, or

(b) if there is no coinciding accounting period of the seller, the
overlapping proportion of the transferred profits amount for each
accounting period of the seller that overlaps with the pre-acquisition
30accounting period of the purchaser.

(2) The overlapping proportion, in relation to an accounting period of the seller,
is the same as the proportion that the part of the seller’s accounting period
that overlaps with the pre-acquisition accounting period of the purchaser
bears to the whole of the seller’s accounting period.

35“Unused transferred profits amount”

46 (1) This paragraph applies for the purposes of Steps 1 and 2 of paragraph 44.

(2) If the loss period is the first activation period, the reference to the “unused
transferred profits amount” for a pre-acquisition accounting period is a
reference to the transferred profits amount for that period.

(3) If the loss period is a post-activation period, the reference to the “unused
5transferred profits amount” for a pre-acquisition accounting period is a
reference to the amount equal to—

(a) the transferred profits amount for the pre-acquisition accounting
period, less

(b) the total of the amounts applied for the pre-acquisition accounting
10period in accordance with paragraph 25, for the purposes of the
application of that paragraph in relation to the first activation period
or an earlier post-activation period.

“Available activated TTH amount”

47 (1) This paragraph applies for the purposes of allocating an amount to a pre-
15acquisition accounting period under Step 3 of paragraph 44.

(2) The “available activated TTH amount” held by the purchaser for the loss
period, is an amount equal to—

(a) the total activated TTH amount for the period, less

(b) the total of the activated transferred profits amounts allocated under
20paragraph 44 to later pre-acquisition accounting periods.

(3) In sub-paragraph (2)(b) the reference to “later pre-acquisition accounting
periods” is a reference to pre-acquisition accounting periods that begin after
the period mentioned in sub-paragraph (1).

“Closing balance of activated TTH”

48 (1) 25The closing balance of activated TTH for the first activation period, or a post-
activation period in relation to which paragraph 40, 41(3) or 42 applies, the
closing balance of activated TTH for the period is—

(a) the total activated TTH amount held by the purchaser for that
period, less

(b) 30the amount applied in accordance with paragraph 25 for that period.

(2) If paragraph 41(4) applies in relation to a post-activation period, the closing
balance of activated TTH for the period is the negative amount determined
by deducting—

(a) the TTH reduction amount for that period, from

(b) 35the closing balance of activated TTH for the immediately preceding
accounting period.

“Closing balance of the total TTH amount”

49 The closing balance of the total TTH amount for an accounting period is—

(a) the total TTH amount, less

(b) 40the total of the amounts (if any) applied in accordance with
paragraph 25 for that accounting period and earlier accounting
periods.

Part 7 Supplementary charge: recalculation of adjusted ring fence profits

Recalculation: steps

50 (1) This paragraph applies for the purposes of recalculating the transferred
5adjusted ring fence profits amount for the pre-acquisition accounting period
mentioned in paragraph 26(1) (for the purposes of paragraph 26(2)(c)).

(2) The recalculated transferred adjusted ring fence profits amount for the
period is the aggregate of—

(a) the reduced ARFP amount for the pre-acquisition period (see
10paragraphs 51 and 52), and

(b) the adjusted finance cost amount for the loss period mentioned in
paragraph 26(1) (see paragraph 55).

(3) But if the amount given by taking the steps in sub-paragraph (2) is a negative
amount, the recalculated transferred adjusted ring fence profits amount is
15nil.

“Reduced ARFP amount”

51 (1) To determine the “reduced ARFP amount” for a pre-acquisition accounting
period—

(a) take the activated ARFP amount for the period, and

(b) 20reduce that amount by the amount applied, in relation to the loss
period mentioned in paragraph 26(1), in accordance with paragraph
25(2)(b) or (3)(b) for the pre-acquisition accounting period.

(2) This paragraph is subject to paragraph 52.

52 (1) This paragraph (instead of paragraph 51) applies if the percentage specified
25in section 330(1) of CTA 2010 for the pre-acquisition accounting period
mentioned in paragraph 26(1) is greater than 20%.

(2) To determine the “reduced ARFP amount” for the pre-acquisition
accounting period—

(a) calculate the total of—

(i) 30the activated ARFP amount for the period, and

(ii) the ARFP uplift amount for the period (see paragraph 54),

(b) reduce the amount given by paragraph (a) by the amount applied, in
relation to the loss period mentioned in paragraph 26(1), in
accordance with paragraph 25(2)(b) or (3)(b) for the pre-acquisition
35accounting period.

“Activated ARFP amount”

53 (1) The “activated ARFP amount” for a pre-acquisition accounting period is the
amount equal to—

(A/T) x ARFP

40where—

A is the amount applied, in relation to the loss period, in accordance with
paragraph 25(2)(b) or (3)(b) for the pre-acquisition accounting period,

T is the unused transferred profits amount for that period, and

ARFP is the amount of the transferred adjusted ring fence profits for that
5period, determined in accordance with paragraph 27 and subject to sub-
paragraph (4) (reduction to take account of any earlier claims).

(2) In sub-paragraph (1), “unused transferred profits amount” has the same
meaning as it has for the purposes of Steps 1 and 2 of paragraph 44 (see
paragraph 46).

(3) 10Sub-paragraph (4) applies if, in respect of an earlier loss period—

(a) an activated transferred profits amount for the pre-acquisition
accounting period mentioned in paragraph 26(1) is applied in
accordance with paragraph 25(2)(b) or (3)(b), and

(b) a corresponding repayment is determined under paragraph 26(2) (an
15“earlier repayment”).

(4) The amount of the transferred adjusted ring fence profits for the pre-
acquisition accounting period is treated, for the purposes of sub-paragraph
(1), as being reduced by an amount equal to the total of the activated ARFP
amounts for that period for the purposes of each earlier repayment.

20“ARFP uplift amount”

54 The “ARFP uplift amount” for a pre-acquisition accounting period is the
amount equal to—

((SC - 20%)/SC) x A

where—

25SC is the percentage specified in section 330(1) of CTA 2010 for the pre-
acquisition accounting period, and

A is the amount applied, in relation to the loss period, in accordance with
paragraph 25(2)(b) or (3)(b) for the pre-acquisition accounting period.

“Adjusted finance cost amount”

55 30The “adjusted finance cost amount” for a loss period is the amount equal
to—

(A/L) x FC

where—

A is the amount applied, in relation to the loss period, in accordance with
35paragraph 25(2)(b) or (3)(b) for the pre-acquisition accounting period,

L is the amount of the decommissioning loss in the loss period (see
paragraph 23(d)(i) and (ii)), and

FC is the lower of—

(a) the amount of the financing costs brought into account under section
5330(3) of CTA 2010 for the purposes of determining the purchaser’s
adjusted ring fence profits for the loss period, and

(b) the amount of the purchaser’s loss in the ring fence trade for the loss
period (see paragraph 23(d)(i)).

Part 8 10TTH elections: conditions and procedure

Election conditions: associated companies

56 (1) A TTH election may only be made if—

(a) the seller and purchaser are not associated with one another on the
licence transfer date,

(b) 15the corporate restructuring condition is met, or

(c) the hive down condition is met.

(2) The “corporate restructuring condition” is met for the purposes of a TTH
election if —

(a) the seller and purchaser are associated with one another on the
20licence transfer date, and

(b) either—

(i) a third party election is made in respect of the TTH asset
within the permitted period, or

(ii) a hive down election is made in respect of the TTH asset
25within the permitted period.

(3) For the purposes of sub-paragraph (2)(b)(i)—

(a) a “third party election” is an election made between two companies
that are not associated with one another, and

(b) the “permitted period” in relation to a third party election in respect
30of the TTH asset is—

(i) the period of 90 days ending with the licence transfer date
referred to in sub-paragraph (2)(a), or

(ii) the period of 90 days beginning with that date.

(4) For the purposes of sub-paragraph (2)(b)(ii)—

(a) 35a “hive down election” is an election in respect of which the hive
down condition is met, and

(b) the “permitted period” in relation to a hive down election in respect
of the TTH asset is the period of 180 days ending with the licence
transfer date referred to in sub-paragraph (2)(a).

(5) 40The “hive down” condition is met for the purposes of a TTH election if the
seller and purchaser—

(a) are associated with one another on the licence transfer date, but

(b) before the end of the period of 90 days beginning with that date, the
purchaser ceases to be associated with—

(i) the seller, and

(ii) any other company that is associated with the seller.

(6) See paragraph 98 of this Schedule and section 271 of CTA 2010 for further
provision about the meaning of “associated companies”.

5Election conditions: decommissioning relief agreements

57 (1) If the seller is a party to a decommissioning relief agreement, a TTH election
may only be made if the agreement provides for the total TTH amount to be
disregarded when determining the reference amount.

(2) In this Schedule, “decommissioning relief agreement” and “reference
10amount” have the meaning given by section 80(2) of FA 2013.

Timing of election

58 (1) A TTH election in respect of a TTH asset may not be made—

(a) before the licence transfer date, or

(b) after the end of the period of 90 days beginning with that date or, if
15later, 1 June 2019.

(2) Paragraph 3 of Schedule 1A to TMA 1970 (amendment of claims and
elections) does not apply in relation to a TTH election (but see paragraph 74
(amounts discovered to be incorrect)).

Content

59 (1) 20The election must contain such information and declarations as an officer of
Revenue and Customs may reasonably require.

(2) The officer may, in particular, require information and declarations as to—

(a) the TTH asset to which the election relates,

(b) the amount of the seller’s taxable profits that are represented by the
25total TTH amount and each transferred profits amount,

(c) the rate of tax chargeable on those taxable profits, and the amount of
tax paid,

(d) any decommissioning security agreement which relates to the TTH
oil field and the seller, and any estimate of the decommissioning
30costs for the field determined for the purposes of any such
agreement, and

(e) any decommissioning relief agreement to which the seller is a party
(see paragraph 57).

Timing of an enquiry: cases where the corporate restructuring condition is met

60 (1) 35This paragraph applies if—

(a) a TTH election is made, and

(b) the corporate restructuring condition or the hive down condition is
met in relation to that election.

(2) Paragraph 5(2)(a) of Schedule 1A to TMA 1970 (power to enquire into
40claims: time limits) has effect in relation to the election as if the reference in
that provision to the day on which the claim was made were a reference to—

(a) in a case where the corporate restructuring condition is met by
reference to paragraph 56(2)(b)(i), the day on which the third party
election was made;

(b) in a case where the corporate restructuring condition is met by
5reference to paragraph 56(2)(b)(ii), the day on which the seller and
purchaser cease to be associated with one another;

(c) in a case where the hive down condition is met, the day on which the
seller and the purchaser ceased to be associated with one another.

Part 9 10TTH elections: approval

Approval notice

61 An officer of Revenue and Customs may approve the TTH election by giving
notice in writing (an “approval notice”) to the seller and the purchaser.

Deemed approval

62 (1) 15If no approval notice or enquiry notice is given, in respect of the TTH
election, before the end of the period mentioned in paragraph 5(2) of
Schedule 1A to TMA 1970 (time limit for opening an enquiry), the election is
deemed to have been approved by an officer of Revenue and Customs at the
end of that period.

(2) 20In sub-paragraph (1), the reference to an “enquiry notice” is a reference to a
notice under paragraph 5(1) of Schedule 1A to TMA 1970 (intention to
enquire into a claim or election).

Conditions of approval

63 The purchaser is required, as a condition of the approval of the election—

(a) 25to comply with the profit tracking requirements in relation to—

(i) the accounting period in which the interest in a UK oil
licence, referred to in paragraph 1, is acquired by the
purchaser, and

(ii) each subsequent accounting period; and

(b) 30to keep and preserve records, in accordance with such requirements
as may be specified by an officer of Revenue and Customs, for the
purposes of giving effect to this Schedule.

Profit tracking requirements

64 (1) The purchaser complies with the profit tracking requirements in relation to
35an accounting period if the purchaser’s company tax return for the period is
accompanied by a statement of the tracked profit or loss amount for the
period.

(2) The “tracked profit or loss amount” for an accounting period is the amount
of profit or loss that is attributable to the TTH asset, excluding the relevant
40proportion of the decommissioning expenditure amount attributable to the
TTH oil field, for that period.

(3) In sub-paragraph 64(2), “relevant proportion” has the same meaning as in
paragraph 30 (see paragraph 30(5)).

65 (1) For the purposes of determining the tracked profit or loss amount for an
accounting period—

(a) 5just and reasonable apportionments are to be made of the receipts,
expenses, assets and liabilities of—

(i) the purchaser, and

(ii) any other company that is associated with the purchaser and
has an interest in the TTH asset (including an interest in a
10share in the oil won and saved in the TTH oil field), and

(b) for the purposes of paragraph (a), an officer of Revenue and Customs
may require that financing costs for an accounting period are to be
apportioned on such basis as the officer may reasonably specify
before the beginning of that period.

(2) 15In this paragraph “financing costs” has the meaning it has for the purposes
of section 330 of CTA 2010 (see section 331 of that Act).

Senior tracking officers

66 (1) The purchaser’s senior tracking officer must—

(a) take reasonable steps to ensure that the tracked profit and loss
20amount attributable to a TTH asset for each tracking period is
determined in accordance with paragraph 65, and

(b) provide the Commissioners for Her Majesty’s Revenue and Customs
with a certificate as to compliance with paragraph (a).

(2) For each tracking period, the purchaser must notify the Commissioners for
25Revenue and Customs of the name of each person who was its senior
tracking officer at any time during the period.

(3) The certificate under sub-paragraph (1)(b), and the notice under sub-
paragraph (2), must be given—

(a) in the form and manner specified by an officer of Revenue and
30Customs, and

(b) on or before the filing date for the purchaser’s tax return for the
tracking period (see paragraph 14 of Schedule 18 to FA 1998).

(4) In this Part, “tracking period”, in relation to the TTH asset, means each
accounting period in relation to which the purchaser is required under
35paragraph 63(a) to comply with the profit tracking requirements.

67 (1) The purchaser’s “senior tracking officer” is the officer of the purchaser or of
an associated company who, in the purchaser’s reasonable opinion, has
overall responsibility for the purchaser’s financial accounting arrangements.

(2) In this section, “officer”, in relation to a company, means—

(a) 40a director,

(b) a manager,

(c) a secretary, and

(d) any other person managing or purporting to manage any of the
company’s affairs.

68 (1) 45The senior tracking officer is liable to a penalty of £5,000 if the officer,
without reasonable excuse—

(a) fails to comply with paragraph 66(1)(a) at any time in a tracking
period, or

(b) fails to provide a certificate in accordance with paragraph 66(1)(b)
and (3).

(2) 5The senior tracking officer is not liable to more than one penalty under
paragraph 68(1)(a) in respect of the TTH asset and the same tracking period.

(3) If the purchaser, without reasonable excuse, fails to give a notice in
accordance with paragraph 66(2) and (3), the purchaser is liable to a penalty
of £5,000.

(4) 10If (but for this sub-paragraph) more than one person would be liable for a
penalty under sub-paragraph 68(1)(a) or (b) in respect of the TTH asset and
a tracking period, only the person who became the senior tracking officer
latest in the tracking period is liable to such a penalty.

69 (1) Where a senior tracking officer, or the purchaser, becomes liable for a
15penalty under paragraph 68—

(a) Her Majesty’s Revenue and Customs may assess the penalty, and

(b) if they do so, they must notify the person liable for the penalty.

(2) An assessment of a penalty under this Part for a failure in respect of a
tracking period may not be made—

(a) 20more than 6 months after the failure first comes to the attention of an
officer of Revenue and Customs, or

(b) more than 6 years after the filing date for the purchaser’s tax return
for the tracking period (see paragraph 14 of Schedule 18 to FA 1998).

(3) See paragraph 94 for provision about appeals against a penalty under
25paragraph 68.

70 (1) A penalty under paragraph 68 must be paid—

(a) before the end of the period of 30 days beginning with the date on
which the notification under paragraph 69 was issued, or

(b) if a notice of appeal against the penalty is given, before the end of the
30period of 30 days beginning with the date on which the appeal is
determined or withdrawn.

(2) A penalty under this Schedule may be enforced as if it were income tax
charged in an assessment and due and payable or, in the case of the
purchaser, corporation tax charged in an assessment and due and payable.

35Part 10 TTH elections: effective date and withdrawal

Effective date of a TTH election

71 (1) A TTH election in respect of a TTH asset—

(a) has effect, if it is approved in accordance with paragraph 61 or 62,
40from the licence transfer date,

(b) continues to have effect indefinitely in relation to seller, and

(c) continues to have effect in relation to the purchaser unless it is
withdrawn in accordance with the provisions of this Schedule.

(2) References in this Schedule to the “effective date of a TTH election” are to be
construed in accordance with sub-paragraph (1)(a).

Withdrawal of a TTH election by an officer of Revenue and Customs

72 (1) A TTH election ceases to have effect in relation to the purchaser if—

(a) 5the purchaser, without reasonable excuse, persistently fails to
comply with either of the conditions mentioned in paragraph 63, and

(b) an officer of Revenue and Customs gives notice to the purchaser of
the withdrawal of the election.

(2) If notice is given under sub-paragraph (1), the TTH election ceases to have
10effect in relation to the purchaser for the accounting period in which the
notice is given and each subsequent accounting period.

(3) A notice given under sub-paragraph (1) does not affect any relief given by
reference to paragraph 25 or 26 for a loss period ending before the notice is
given.

(4) 15See paragraph 94 for provision about appeals against a decision to withdraw
an election under this paragraph.

Part 11 TTH elections: inaccuracies

Penalties for errors

73 20If a document provided for the purposes of making a TTH election contains
an inaccuracy which is, or results in, an overstatement of the total TTH
amount, Schedule 24 to FA 2007 has effect as if—

(a) the seller (and not the purchaser) is treated as giving the document
to Her Majesty’s Revenue and Customs,

(b) 25the inaccuracy is treated (so far as would not otherwise be the case)
as leading to a false or inflated claim to repayment of tax, and

(c) “the potential lost revenue” in respect of the inaccuracy is an amount
equal to 10% of the amount by which the total TTH amount is
overstated.

30Amendment of TTH election: amounts discovered to be incorrect

74 (1) This paragraph applies if an officer of Revenue and Customs discovers that
a TTH election incorrectly states an amount that affects, or may affect—

(a) the amount which may be applied in accordance with paragraph 25
(effect of trade loss relief provisions), or

(b) 35the amount of a repayment determined by reference to paragraph 26
(supplementary charge: repayment of tax).

(2) The officer—

(a) may amend the TTH election to correct that amount, subject to
paragraph 75, and

(b) 40must give notice to the purchaser of an amendment under paragraph
(a).