|
| |
|
(2) | After sub-paragraph (2) insert— |
| |
| |
(a) | the expenditure would (apart from this sub-paragraph) be |
| |
regarded as incurred with a view to the subsequent disposal |
| |
of the asset or of an interest in it, and |
| 5 |
(b) | the asset has, at any time in the period of 6 years ending with |
| |
the date on which the expenditure was incurred, been used in |
| |
a way that gives rise to tax-exempt tariffing receipts, |
| |
| the expenditure shall not be regarded for the purposes of this |
| |
paragraph as expenditure incurred with a view to the subsequent |
| 10 |
disposal of the asset or of an interest in it, to the extent that the |
| |
amount of the expenditure falls to be reduced in accordance with |
| |
sub-paragraph (2B) below. |
| |
(2B) | The reduction is to be made by applying section 7A of this Act in |
| |
relation to the expenditure as it applies in relation to disposal |
| 15 |
receipts in respect of a disposal, but with the substitution— |
| |
(a) | for references to the disponor, of references to the |
| |
participator incurring the expenditure (“the relevant |
| |
| |
(b) | for references to the amount or value (apart from that section) |
| 20 |
of any disposal receipts of the disponor in respect of the |
| |
disposal, of references to the amount which would, apart |
| |
from sub-paragraph (2A) above, be the amount of the |
| |
expenditure incurred by the relevant participator with a view |
| |
to the subsequent disposal of the asset or of an interest in it, |
| 25 |
(c) | for references to the interest disposed of, of references to the |
| |
asset or interest whose subsequent disposal gives or is |
| |
expected to give rise to disposal receipts, |
| |
(d) | for references to the date of the disposal, of references to the |
| |
date on which the expenditure was incurred, |
| 30 |
| and taking the reference in subsection (6)(b) of that section to a |
| |
reduction made by virtue of that section as a reference to a reduction |
| |
made by virtue of that section for the purposes of section 7(9) of this |
| |
| |
| 35 |
7 (1) | In Part 2 of Schedule 1, paragraph 7 is amended as follows. |
| |
(2) | In sub-paragraph (1)(c) (use of asset otherwise than in connection with a |
| |
taxable field between acquisition etc and first use in connection with oil |
| |
| |
(a) | after “was used” insert “(i)”; |
| 40 |
(b) | after “otherwise than in connection with a taxable field,” insert “or”; |
| |
(c) | after the word “or” so inserted, insert the following sub-paragraph— |
| |
“(ii) | in connection with a taxable field in a way that |
| |
gives rise to tax-exempt tariffing receipts,”. |
| |
Subsequent use of new asset otherwise than in connection with a taxable field |
| 45 |
8 (1) | In Part 2 of Schedule 1, paragraph 8 is amended as follows. |
| |
|
| |
|
| |
|
(2) | In sub-paragraph (3) (asset giving rise to tariff receipts attributable to taxable |
| |
field treated as used in connection with a taxable field)— |
| |
(a) | after “gives rise to” insert “(a)”; |
| |
(b) | after “attributable to a taxable field,” insert “or”; |
| |
(c) | after the word “or” so inserted, insert the following paragraph— |
| 5 |
“(b) | tax-exempt tariffing receipts which, if they were tariff |
| |
receipts (and expenditure were or had been allowable |
| |
accordingly), would be tariff receipts of the purchaser |
| |
attributable to a taxable field,”. |
| |
(3) | In sub-paragraph (5) (chargeable period to be determined in relation to field |
| 10 |
in respect of which asset last gave rise to tariff receipts of purchaser etc) at |
| |
the end of paragraph (b) insert “or |
| |
(c) | if it is later than paragraph (a) and (where otherwise |
| |
applicable) paragraph (b) above, in respect of which the asset |
| |
would have last given rise to tariff receipts of the purchaser |
| 15 |
had tax-exempt tariffing receipts of the purchaser been tariff |
| |
receipts of his (and if expenditure were or had been allowable |
| |
| |
| |
| 20 |
Expenditure incurred in transitional period: restriction of tax-exempt tariffing receipts |
| |
| |
| “claim period” has the same meaning as in Part 1 of the Oil Taxation |
| |
| |
| “relevant receipts” means each of the following— |
| 25 |
(a) | tax-exempt tariffing receipts; |
| |
(b) | amounts that would be tax-exempt tariffing receipts apart |
| |
| |
| “the transitional period” means the period— |
| |
(a) | beginning with 9th April 2003, and |
| 30 |
(b) | ending with 31st December 2003. |
| |
(2) | This paragraph applies where— |
| |
(a) | expenditure was incurred in the transitional period by a participator |
| |
in an oil field in acquiring, bringing into existence or enhancing the |
| |
| 35 |
(b) | the asset is one whose useful life continues, or is expected to |
| |
continue, after the end of the claim period in which the expenditure |
| |
| |
(c) | the expenditure is allowable for a claim period ending after 9th April |
| |
| 40 |
(d) | at the time the expenditure was incurred, the asset was being, or was |
| |
expected to be, used to any extent in relation to— |
| |
(i) | an oil field or foreign field (a “user field”), or |
| |
(ii) | oil won from such a field, and |
| |
(e) | that use (or expected use) is use in such a way as, in a chargeable |
| 45 |
period ending on or after 30th June 2004, gives rise, or would have |
| |
|
| |
|
| |
|
given rise, to relevant receipts of the participator or, where sub- |
| |
paragraph (3) applies, of a successor. |
| |
(3) | This sub-paragraph applies where— |
| |
(a) | after the incurring of the expenditure, there is or has been a transfer |
| |
of an interest of the participator’s in the asset, and |
| 5 |
(b) | as a result of that transfer (or of any subsequent transfer of the whole |
| |
or any part of that interest), relevant receipts (“consequential |
| |
relevant receipts”) arise, or are expected to arise, to a person (a |
| |
“successor”) who is a participator in an oil field. |
| |
(4) | In the case of each user field, the initial portion of the aggregate of the |
| 10 |
relevant receipts of the participator, and the consequential relevant receipts |
| |
of each successor, that are referable to— |
| |
(a) | use of the asset in relation to that field or oil won from it, or |
| |
(b) | the provision of services or other business facilities of whatever kind |
| |
in connection with any such use of the asset (otherwise than by the |
| 15 |
participator or the successor himself), |
| |
| shall not be tax-exempt tariffing receipts (and shall accordingly continue to |
| |
| |
| |
| “the initial portion”, in relation to the aggregate of any relevant |
| 20 |
receipts, means so much of that aggregate as does not exceed the |
| |
qualifying threshold for the user field in question; |
| |
| and for this purpose amounts received or receivable at an earlier |
| |
date are to be attributed to the initial portion before amounts |
| |
received or receivable at a later date; |
| 25 |
| “the qualifying threshold”, in relation to a user field, means an |
| |
amount equal to such part of the aggregate of the expenditure— |
| |
(a) | incurred by the participator in relation to the asset in |
| |
| |
(b) | falling within sub-paragraph (2), |
| 30 |
| as it is just and reasonable to apportion to the use (or expected use) |
| |
of the asset, in relation to that user field or oil won from it, in a way |
| |
that gives rise to relevant receipts of the participator or |
| |
consequential relevant receipts of any successor. |
| |
(6) | Expressions used in this paragraph and in section 6A of the Oil Taxation Act |
| 35 |
1983 (c. 56) have the same meaning in this paragraph as they have in that |
| |
| |
| |
Amendments of the Taxes Act 1988 |
| |
| 40 |
10 | The Taxes Act 1988 is amended in accordance with the following provisions |
| |
| |
Section 496: treatment of tax-exempt tariffing receipts for income and corporation tax |
| |
11 (1) | Section 496 (tariff receipts) is amended as follows. |
| |
|
| |
|
| |
|
(2) | In subsection (1)(a) (tariff receipts to be treated as receipts of the separate |
| |
trade referred to in section 492(1)) after “tariff receipt” insert “or tax-exempt |
| |
| |
(3) | In subsection (2) (activities of participator etc giving rise to tariff receipts to |
| |
be treated as oil extraction activities) after “tariff receipts” insert “or tax- |
| 5 |
exempt tariffing receipts”. |
| |
(4) | In subsection (3) (disregard of certain sums in fact received or receivable by |
| |
person connected with participator)— |
| |
(a) | in the opening words, after “tariff receipt” insert “or tax-exempt |
| |
| 10 |
(b) | in paragraph (b), after “tariff receipt” insert “or tax-exempt tariffing |
| |
| |
(5) | In consequence of the amendments made by this paragraph, the sidenote to |
| |
the section becomes “Tariff receipts and tax-exempt tariffing receipts”. |
| |
| 15 |
Amendments of other enactments |
| |
| |
| |
12 (1) | Section 98 of the Finance Act 1999 (c. 16) is amended as follows. |
| |
(2) | After the words “tariff receipts”, in each place where they occur, insert “, tax- |
| 20 |
exempt tariffing receipts”. |
| |
(3) | After subsection (6) insert— |
| |
“(6A) | In relation to tax-exempt tariffing receipts, any reference in this |
| |
| |
(a) | to being attributable to a field for a period, or |
| 25 |
(b) | to being referable to an asset, |
| |
| shall be construed as if tax-exempt tariffing receipts were tariff |
| |
receipts (and expenditure were or had been allowable accordingly).”. |
| |
| |
| |
Schedule to be inserted as Schedule 19B to the Taxes Act 1988 |
| 30 |
| The following is the Schedule to be inserted as Schedule 19B to the Taxes Act |
| |
|
| |
|
| |
|
| |
| |
| |
Petroleum extraction activities: exploration expenditure supplement |
| |
| |
| 5 |
| |
1 (1) | This Schedule entitles a company carrying on a ring fence trade, |
| |
on making a claim in respect of an accounting period ending on or |
| |
after 1st January 2004, to a supplement (initially of 6%, but |
| |
variable by Treasury order) in respect of— |
| 10 |
(a) | qualifying capital expenditure incurred before the trade is |
| |
| |
(b) | losses incurred in the trade, determined by reference to |
| |
allowances under Part 6 of the Capital Allowances Act |
| |
(expenditure on research and development) in respect of |
| 15 |
qualifying capital expenditure, and |
| |
(c) | some or all of the supplement allowed in respect of earlier |
| |
| |
(2) | To qualify, the capital expenditure in question must be incurred |
| |
on or after 1st January 2004 in respect of oil and gas exploration |
| 20 |
and appraisal (as well as satisfying other conditions). |
| |
(3) | Part 2 makes provision about the application and interpretation of |
| |
| |
(4) | Part 3 makes provision about supplement in relation to |
| |
expenditure incurred by the company— |
| 25 |
(a) | with a view to carrying on a ring fence trade, but |
| |
(b) | in an accounting period before the company sets up and |
| |
| |
(5) | Part 4 makes provision about supplement in relation to losses |
| |
incurred in carrying on the ring fence trade. |
| 30 |
(6) | There is a limit on the number of accounting periods (6) in respect |
| |
of which a company may claim supplement. |
| |
(7) | In determining the amount of supplement allowable, reductions |
| |
fall to be made in respect of— |
| |
(a) | disposal receipts by virtue of section 555 of the Capital |
| 35 |
Allowances Act (disposal of oil licence with exploitation |
| |
| |
(b) | ring fence losses that could be set off under section 393A |
| |
against ring fence profits of earlier periods, |
| |
(c) | ring fence losses incurred in earlier periods that fall to be |
| 40 |
set off under section 393 against profits of succeeding |
| |
| |
(d) | unrelieved group ring fence profits. |
| |
|
| |
|
| |
|
| |
Application and interpretation |
| |
| |
2 | This Schedule applies in relation to any company which— |
| |
(a) | carries on a ring fence trade, or |
| 5 |
(b) | is engaged in oil and gas exploration and appraisal (see |
| |
section 837B) with a view to carrying on a ring fence trade, |
| |
| and in this Schedule any such company is referred to as a |
| |
| |
| 10 |
3 (1) | In this Schedule, in the case of any qualifying company,— |
| |
| “the commencement period” means the accounting period |
| |
in which the company sets up and commences its ring |
| |
| |
| “post-commencement period” means any accounting |
| 15 |
period ending on or after 1st January 2004— |
| |
(a) | which is the commencement period, or |
| |
(b) | which ends after the commencement period; |
| |
| “pre-commencement period” means any accounting period |
| |
| 20 |
(a) | on or after 1st January 2004, and |
| |
(b) | before the commencement period. |
| |
(2) | For the purposes of this Schedule a company not within the charge |
| |
to corporation tax which incurs qualifying E&A expenditure is to |
| |
be treated as having such accounting periods as it would have if— |
| 25 |
(a) | it carried on a trade consisting of the activities in respect of |
| |
which the expenditure is incurred, and |
| |
(b) | it had started to carry on that trade when it started to carry |
| |
on the research and development on which the |
| |
| 30 |
| |
4 (1) | For the purposes of this Schedule, the relevant percentage for any |
| |
accounting period ending on or after 1st January 2004 is 6%. |
| |
(2) | The Treasury may by order vary the percentage for the time being |
| |
specified in sub-paragraph (1) for such accounting periods as may |
| 35 |
be specified in the order. |
| |
Limit on number of accounting periods for which supplement may be claimed |
| |
5 (1) | A company may claim supplement under this Schedule in respect |
| |
of no more than 6 accounting periods. |
| |
(2) | The accounting periods in respect of which claims are made need |
| 40 |
| |
|
| |
|
| |
|
Qualifying E&A expenditure |
| |
6 (1) | For the purposes of this Schedule “qualifying E&A expenditure” is |
| |
any expenditure as respects which the following conditions are |
| |
| |
(2) | Condition 1 is that the expenditure is incurred on or after 1st |
| 5 |
| |
(3) | Condition 2 is that, for the purposes of Part 6 of the Capital |
| |
Allowances Act, the expenditure is qualifying expenditure |
| |
incurred on research and development consisting of oil and gas |
| |
exploration and appraisal (see section 437(2)(b) of that Act). |
| 10 |
(4) | Condition 3 is that an allowance under section 441 of that Act is |
| |
claimed in respect of the expenditure. |
| |
(5) | Condition 4 is that the expenditure is incurred in the course of oil |
| |
| |
| 15 |
(a) | those oil extraction activities are comprised in a ring fence |
| |
| |
(b) | after incurring the expenditure, the person incurring it sets |
| |
up and commences a ring fence trade connected with the |
| |
research and development. |
| 20 |
Unrelieved group ring fence profits for accounting periods |
| |
7 (1) | There is an amount of unrelieved group ring fence profits for an |
| |
accounting period of a qualifying company (“company Q”) in any |
| |
| |
(a) | the company and any other company (“company X”) are |
| 25 |
members of the same group of companies, within the |
| |
meaning given by section 413(3)(a), and |
| |
(b) | company X has an amount of taxable ring fence profits (see |
| |
paragraph 8) for a corresponding accounting period. |
| |
(2) | An accounting period of company X corresponds to an accounting |
| 30 |
| |
(a) | it coincides with, or falls wholly within, the accounting |
| |
| |
(b) | it falls partly within the accounting period of company Q. |
| |
(3) | Where an accounting period of company X— |
| 35 |
(a) | coincides with an accounting period of company Q, or |
| |
(b) | falls wholly within an accounting period of company Q, |
| |
| there is, for the accounting period of company Q, an amount of |
| |
unrelieved group ring fence profits equal to the whole of company |
| |
X’s taxable ring fence profits for its accounting period. |
| 40 |
(4) | Where an accounting period of company X falls partly within an |
| |
accounting period of company Q— |
| |
(a) | there is an amount of unrelieved group ring fence profits |
| |
for the accounting period of company Q, and |
| |
(b) | that amount is an amount equal to the part of company X’s |
| 45 |
taxable ring fence profits for its accounting period that is |
| |
attributable, on an apportionment in accordance with |
| |
|
| |
|