Corporation Tax Bill

House of Commons

Session 2009 - 10
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Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Part 8 — Oil activities
Chapter 4 — Calculation of profits
152

295
Amounts excluded from section 293(1)
(1)
This section applies if—
(a)
the whole of the guarantee payment mentioned in section 293, or of the
assets which under section 294 are attributed to the guarantee payment,
is not applied in meeting liabilities of the relevant participator so
5
mentioned which fall within section 104(1)(a) and (b) of FA 1991, and
(b)
a sum representing the unapplied part of the guarantee payment or of
those assets is repaid, directly or indirectly, to the guarantor so
mentioned.
(2)
Any liability of the relevant participator to repay that sum is to be excluded in
10
determining the total liability of the relevant participator which falls within
section 293(1)(b).
(3)
The repayment to the guarantor of that sum is not to be regarded as
expenditure incurred by the relevant participator as mentioned in section
293(1)(c).
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Abandonment expenditure
296
Introduction to sections 297 and 298
(1)
Sections 297 and 298 apply if—
(a)
paragraph 2A of Schedule 5 to OTA 1975 applies, or would apply if a
claim under paragraph 2A(2) of that Schedule were made, and
20
(b)
the default payment falls (in whole or part) to be attributed to the
contributing participator under paragraph 2A(2) of that Schedule.
(2)
In section 297 “the additional abandonment expenditure” means the amount
which is attributed to the contributing participator as mentioned in subsection
(1)(b) (whether representing the whole or only part of the default payment).
25
(3)
In this Chapter “default payment”, “the defaulter” and “contributing
participator” have the same meaning as in paragraph 2A of Schedule 5 to OTA
1975.
297
Relief for expenditure incurred by a participator in meeting defaulter’s
abandonment expenditure
30
(1)
Relief by way of capital allowance, or a deduction in calculating ring fence
income, is to be available to the contributing participator in respect of the
additional abandonment expenditure if any such relief or deduction would
have been available to the defaulter if—
(a)
the defaulter had incurred the additional abandonment expenditure,
35
and
(b)
at the time that that expenditure was incurred the defaulter continued
to carry on a ring fence trade.
(2)
The basis of qualification for or entitlement to any relief or deduction which is
available to the contributing participator under this section is to be determined
40
on the assumption that the conditions in subsection (1)(a) and (b) are met.
(3)
But, subject to subsection (2), any such relief or deduction is to be available in
the same way as if the additional abandonment expenditure had been incurred

Corporation Tax Bill
Part 8 — Oil activities
Chapter 4 — Calculation of profits
153

by the contributing participator for the purposes of the ring fence trade carried
on by the contributing participator.
298
Reimbursement by defaulter in respect of certain abandonment expenditure
(1)
This section applies if expenditure is incurred, or consideration in money’s
worth is given, by the defaulter in reimbursing the contributing participator in
5
respect of, or otherwise making good to the contributing participator, the
whole or any part of the default payment.
(2)
In this section “reimbursement expenditure” means expenditure incurred as
mentioned in subsection (1) or consideration (or the value of consideration)
given as so mentioned; and any reference to the incurring of reimbursement
10
expenditure is to be read accordingly.
(3)
Reimbursement expenditure is to be allowed as a deduction in calculating the
defaulter’s ring fence income (but this is subject to subsection (6)).
(4)
Reimbursement expenditure received by the contributing participator is to be
treated as a receipt (in the nature of income) of the participator’s ring fence
15
trade for the relevant accounting period (but this is subject to subsection (6)).
(5)
Any additional assessment to corporation tax required in order to take account
of the receipt of reimbursement expenditure by the contributing participator
may be made at any time not later than 4 years after the end of the calendar
year in which the reimbursement expenditure is so received.
20
(6)
In relation to a particular default payment, reimbursement expenditure
incurred at any time—
(a)
is to be allowed as mentioned in subsection (3), and
(b)
is to be taken into account as a result of subsection (4) in calculating the
contributing participator’s ring fence income,
25

only so far as, when aggregated with any reimbursement expenditure
previously incurred in respect of that default payment, it does not exceed so
much of the default payment as falls to be attributed to the contributing
participator as mentioned in section 296(1)(b).
(7)
The incurring of reimbursement expenditure is not to be regarded, by virtue of
30
section 532 of CAA 2001 (the general rule excluding contributions), as the
meeting of the expenditure of the contributing participator in making the
default payment.
(8)
In subsection (4) “the relevant accounting period” means—
(a)
the accounting period in which the reimbursement expenditure is
35
received by the contributing participator,
(b)
if the contributing participator ceases to carry on the ring fence trade
before the receipt of the reimbursement expenditure, the last
accounting period of the trade, or
(c)
if the contributing participator ceases to be within the charge to
40
corporation tax in respect of the ring fence trade before the receipt of
the reimbursement expenditure, the accounting period during or at the
end of which the contributing participator ceased to be within the
charge to corporation tax in respect of the trade.

Corporation Tax Bill
Part 8 — Oil activities
Chapter 4 — Calculation of profits
154

Deduction of PRT in calculating income for corporation tax purposes
299
Deduction of PRT in calculating income for corporation tax purposes
(1)
This section applies if a participator in an oil field has paid any petroleum
revenue tax with which the participator was chargeable for a chargeable
period.
5
(2)
In calculating for corporation tax the amount of the participator’s income
arising from oil extraction activities or oil rights in the relevant accounting
period, there is to be deducted an amount equal to that petroleum revenue tax.
(3)
There are to be made all such adjustments of assessments to corporation tax as
are required in order to give effect to subsection (2).
10
(4)
In this section “the relevant accounting period”, in relation to any petroleum
revenue tax paid by a company, means—
(a)
the accounting period of the company in or at the end of which the
chargeable period for which that tax was charged ends, or
(b)
if that chargeable period ends after the accounting period of the
15
company in or at the end of which the company—
(i)
ceases to carry on the trade giving rise to the income referred to
above, or
(ii)
ceases to be within the charge to corporation tax in respect of the
trade,
20

that accounting period.
300
Effect of repayment of PRT: general rule
(1)
This section applies if some or all of the petroleum revenue tax in respect of
which a deduction has been made under section 299(2) is subsequently repaid.
(2)
The deduction is to be reduced or extinguished accordingly.
25
(3)
Any additional assessment to corporation tax required in order to give effect to
subsection (2) may be made at any time not later than 4 years after the end of
the calendar year in which the petroleum revenue tax was repaid.
(4)
This section is subject to section 301.
301
Effect of repayment of PRT: special rule
30
(1)
This section applies if, in a case where paragraph 17 of Schedule 2 to OTA 1975
applies, an amount of petroleum revenue tax in respect of which a deduction
has been made under section 299(2) is repaid as a result of an assessment under
that Schedule or an amendment of such an assessment.
(2)
As regards so much of that repayment as constitutes the appropriate
35
repayment—
(a)
section 300 does not apply, and
(b)
the following provisions apply in relation to the company which is
entitled to the repayment.
(3)
In calculating for corporation tax the amount of the company’s income arising
40
in the relevant accounting period from oil extraction activities or oil rights

Corporation Tax Bill
Part 8 — Oil activities
Chapter 4 — Calculation of profits
155

there is to be added an amount equal to the appropriate repayment (but this is
subject to subsections (4) and (5)).
(4)
Subsection (5) applies if—
(a)
two or more carried back losses give rise to the appropriate repayment,
(b)
the operative chargeable period in relation to each of the carried back
5
losses is not the same, and
(c)
if this section were applied separately in relation to each of the carried
back losses there would be more than one relevant accounting period.
(5)
The appropriate repayment is to be treated as apportioned between each of the
relevant accounting periods mentioned in subsection (4)(c) in such a way as to
10
secure that the amount added as a result of subsection (3) in relation to each of
those relevant accounting periods is what it would have been if—
(a)
relief for each of the carried back losses for which there is a different
operative chargeable period had been given by a separate assessment
or amendment of an assessment under Schedule 2 to OTA 1975, and
15
(b)
relief for a carried back loss accruing in an earlier chargeable period
had been so given before relief for a carried back loss accruing in a later
chargeable period.
(6)
Any additional assessment to corporation tax required in order to give effect to
the addition of an amount as a result of subsection (3) may be made at any time
20
not later than 4 years after the end of the calendar year in which the repayment
of petroleum revenue tax comprising the appropriate repayment is made.
(7)
In this section—
“allowable loss” has the same meaning as in Part 1 of OTA 1975 (see
section 2 of that Act),
25
“the appropriate repayment” has the meaning given by paragraph 17(2)
of Schedule 2 to that Act,
“carried back loss”, in relation to the appropriate repayment, means an
allowable loss—
(a)
which falls within paragraph 17(1)(a) of Schedule 2 to OTA
30
1975, and
(b)
which (alone or together with one or more other carried back
losses) gives rise to the appropriate repayment,
“the operative chargeable period”, in relation to a carried back loss, means
the chargeable period in which the loss accrued, and
35
“the relevant accounting period”, in relation to the company which is
entitled to the appropriate repayment, means—
(a)
the accounting period in or at the end of which the operative
chargeable period ends,
(b)
if the company ceases to carry on its ring fence trade before the
40
end of the operative chargeable period, the last accounting
period of that trade, or
(c)
if the company ceases to be within the charge to corporation tax
in respect of that trade before the end of the operative
chargeable period, the accounting period during or at the end of
45
which the company ceased to be within the charge to
corporation tax in respect of that trade.