Corporation Tax Bill

House of Commons

Session 2009 - 10
Internet Publications
Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Part 8 — Oil activities
Chapter 6 — Supplementary charge in respect of ring fence trades
170

(i)
fall (or would fall) to be treated, in the accounts of the lessee or
a person connected with the lessee, as a finance lease or a loan,
or
(ii)
are comprised in arrangements which fall (or would fall) to be
so treated.
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(7)
For the purposes of applying subsection (6)(b), the lessee and any person
connected with the lessee are to be treated as being companies which are
incorporated in a part of the United Kingdom.
(8)
Section 1176(1) (meaning of “connected” persons) does not apply for the
purposes of this section.
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(9)
In this section—
“accounts”, in relation to a company, includes accounts which—
(a)
relate to two or more companies of which that company is one,
and
(b)
are drawn up in accordance with generally accepted accounting
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practice,
“debtor relationship” has the meaning given by section 302(6) of CTA
2009,
“exchange gains” and “exchange losses” are to be read in accordance with
section 475 of CTA 2009, and
20
“long funding operating lease” means a long funding operating lease for
the purposes of Part 2 of CAA 2001 (see section 70YI(1) of that Act).
332
Assessment, recovery and postponement of supplementary charge
(1)
The provisions of section 330(1) relating to the charging of a sum as if it were
an amount of corporation tax are be taken as applying all enactments applying
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generally to corporation tax.
(2)
But this is subject to—
(a)
the provisions of the Taxes Acts,
(b)
any necessary modifications, and
(c)
subsection (5).
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(3)
The enactments mentioned in subsection (1) include—
(a)
those relating to returns of information and the supply of accounts,
statements and reports,
(b)
those relating to the assessing, collecting and receiving of corporation
tax,
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(c)
those conferring or regulating a right of appeal, and
(d)
those concerning administration, penalties, interest on unpaid tax and
priority of tax in cases of insolvency under the law of any part of the
United Kingdom.
(4)
Accordingly TMA 1970 is to have effect as if any reference to corporation tax
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included a sum chargeable under section 330(1) as if it were an amount of
corporation tax (but this does not limit subsections (1) to (3)).
(5)
In the Corporation Tax (Treatment of Unrelieved Surplus Advance
Corporation Tax) Regulations 1999 (S.I. 1999/358) or any further regulations
made under section 32 of FA 1998 (unrelieved surplus advance corporation
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tax)—

Corporation Tax Bill
Part 8 — Oil activities
Chapter 7 — Reduction of supplementary charge for certain new oil fields
171

(a)
references to corporation tax do not include a sum chargeable on a
company under section 330(1) as if it were corporation tax, and
(b)
references to profits charged to corporation tax do not include adjusted
ring fence profits, within the meaning of section 330.
(6)
In this section “the Taxes Acts” has the same meaning as in TMA 1970 (see
5
section 118(1) of that Act).
Chapter 7
Reduction of supplementary charge for certain new oil fields
Reduction of adjusted ring fence profits
333
Reduction of adjusted ring fence profits
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(1)
A company’s adjusted ring fence profits for an accounting period are to be
reduced by the amount of the company’s pool of field allowances for that
accounting period (see sections 334 to 336).
(2)
But, if the profits are less than the amount of the pool, the profits are to be
reduced to nil.
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Pool of field allowances
334
Company’s pool of field allowances
A company’s pool of field allowances for an accounting period (“the relevant
accounting period”) is—

where—
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P is the amount of the company’s pool of field allowances for the previous
accounting period that has been carried into the relevant accounting
period (see sections 335 and 336), and
R is the aggregate of the amounts of field allowances for new oil fields
which the company holds (see sections 337 to 339) that are activated in
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respect of—
(a)
the relevant accounting period (see sections 340 and 341), and
(b)
reference periods that fall within the relevant accounting period
(see sections 342 to 344).
335
Carrying part of pool of field allowances into following period
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(1)
This section applies if —
(a)
a company has a pool of field allowances for an accounting period
(“accounting period 1”), and

Corporation Tax Bill
Part 8 — Oil activities
Chapter 7 — Reduction of supplementary charge for certain new oil fields
172

(b)
the company’s adjusted ring fence profits for accounting period 1 are
reduced to nil in accordance with section 333(2).
(2)
A part of the company’s pool of field allowances for accounting period 1 is to
be carried into the following accounting period (“accounting period 2”).
(3)
The part to be carried into accounting period 2 is—

5

where—
F is the amount of the company’s pool of field allowances for accounting
period 1, and
P is the amount of the adjusted ring fence profits for accounting period 1.
336
Carrying whole of pool of field allowances into following period
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(1)
This section applies if a company—
(a)
has a pool of field allowances for an accounting period, but
(b)
has no adjusted ring fence profits for the accounting period.
(2)
The whole of the company’s pool of field allowances for the accounting period
is to be carried into the following accounting period.
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Field allowance: when held and unactivated amount
337
Initial licensee to hold a field allowance
(1)
A company that is an initial licensee in a new oil field is to hold a field
allowance for that field as from the beginning of the authorisation day.
(2)
The amount of the field allowance which the licensee is to hold at that time is—

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where—
T is the amount of the total field allowance for the field (see section 356),
and
S is the share of the equity in the field which the initial licensee has at the
beginning of the authorisation day.
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338
Holding a field allowance on acquisition of equity share
For provision about holding a field allowance by virtue of the acquisition of a
share of the equity in a new oil field, see section 347(2).

Corporation Tax Bill
Part 8 — Oil activities
Chapter 7 — Reduction of supplementary charge for certain new oil fields
173

339
Unactivated amount of field allowance
(1)
This section applies if a company holds a field allowance for a new oil field by
virtue of section 337 or 347(2).
(2)
The unactivated amount of that allowance at a particular time (“the relevant
time”) is

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where—
R is the amount of the field allowance which the company held before the
relevant time by virtue of section 337 or 347(2),
E is the total amount of the field allowance received before the relevant
time by virtue of section 347(1) (company already holding field
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allowance acquires equity share),
A is the total amount of the field allowance activated in respect of —
(a)
accounting periods ending before the relevant time, or
(b)
reference periods ending before the relevant time, and
D is the total amount of reductions in the field allowance made before the
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relevant time by virtue of section 346 (company disposes of equity
share).
(3)
A company ceases to hold a field allowance for a new oil field if the unactivated
amount of that allowance falls to nil.
No change in equity share: activation of allowance
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340
Introduction to section 341
(1)
Section 341 applies to a company in respect of a new oil field and an accounting
period if the following conditions are met.
(2)
Condition A is that the company is a licensee in the field for the whole of the
accounting period.
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(3)
Condition B is that the company’s share of the equity in the field is the same
during the whole of the accounting period.
(4)
Condition C is that the company holds an unactivated amount of field
allowance for the field at the beginning of the accounting period.
(5)
Condition D is that the company has relevant income from the new oil field in
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the accounting period.
341
Activation of field allowance
(1)
An amount of the company’s field allowance for the new oil field is to be
activated in respect of the accounting period.
(2)
The amount of the field allowance to be activated is the smallest of the
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following amounts—
(a)
the relevant activation limit,

Corporation Tax Bill
Part 8 — Oil activities
Chapter 7 — Reduction of supplementary charge for certain new oil fields
174

(b)
the company’s relevant income from the field in the accounting period,
and
(c)
the unactivated amount of the field allowance which the company
holds at the beginning of the accounting period.
(3)
The relevant activation limit is—

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where—
T is the amount of the total field allowance for the field (see section 356),
E is the company’s share of the equity in the field during the accounting
period, and
N is the number of days in the accounting period.
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Change in equity share: activation of allowance
342
Introduction to sections 343 and 344
(1)
Sections 343 and 344 apply to a company in respect of a new oil field and an
accounting period if the following conditions are met.
(2)
Condition A is that the company is a licensee in the field for the whole, or for
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part, of the accounting period.
(3)
Condition B is that the company’s share of the equity in the field is different at
different times during the accounting period.
(4)
Condition C is that the company holds an unactivated amount of field
allowance for the field at any time during the accounting period.
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(5)
Condition D is that the company has relevant income from the field in the
accounting period.
(6)
In a case where a company has three or more different shares of the equity in a
new oil field during a particular day, sections 343 and 344 (in particular
provisions relating to the beginning or end of a day) have effect subject to the
25
necessary modifications.
343
Reference periods
(1)
For the purposes of section 344, the accounting period, or (if the company is not
a licensee for the whole of the accounting period) the part or parts of the
accounting period for which the company is a licensee, is to be divided into
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reference periods.
(2)
A reference period is a period of consecutive days that meets the following
conditions.
(3)
Condition A is that, at the beginning of each day in the period, the company is
a licensee in the new oil field.
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Corporation Tax Bill
Part 8 — Oil activities
Chapter 7 — Reduction of supplementary charge for certain new oil fields
175

(4)
Condition B is that, at the beginning of each day in the period, the company’s
share of the equity in the field is the same.
(5)
Condition C is that, at the beginning of the first day of the period, the company
holds an unactivated amount of field allowance for the field.
(6)
Condition D is that each day in the period falls within the accounting period.
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344
Activation of field allowance
(1)
An amount of the company’s field allowance for the new oil field is to be
activated in respect of each reference period.
(2)
The amount of the field allowance to be activated is the smallest of the
following amounts—
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(a)
the relevant activation limit,
(b)
the company’s relevant income from the field in the reference period,
and
(c)
the unactivated amount of the field allowance which the company
holds at the beginning of the reference period.
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(3)
The relevant activation limit is


where—
T is the amount of the total field allowance for the field (see section 356),
E is the company’s share of the equity in the field during the reference
period, and
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R is the number of days in the reference period.
(4)
The company’s relevant income from the field in the reference period is


where—
I is the company’s relevant income from the field in the whole of the
accounting period,
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R is the number of days in the reference period, and
L is the number of days in the accounting period for which the company
is a licensee in the new oil field.
Change in equity share: transfer of field allowance
345
Introduction to sections 346 and 347
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(1)
Sections 346 and 347 apply if the following conditions are met.

Corporation Tax Bill
Part 8 — Oil activities
Chapter 7 — Reduction of supplementary charge for certain new oil fields
176

(2)
Condition A is that a company that is a licensee in a new oil field (“the
transferor”) disposes of the whole or a part of its share of the equity in the new
oil field (and in section 347 each of those to which a share of the equity is
disposed of is referred to as “a transferee”).
(3)
Condition B is that, immediately before the disposal, the transferor holds an
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unactivated amount of field allowance for the new oil field.
(4)
Subsection (5) applies when—
(a)
determining (for the purposes of this section) whether a transferor
holds an unactivated amount of field allowance immediately before the
disposal (“the relevant time”), and
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(b)
determining (for the purposes of section 346), the unactivated amount
of field allowance which a transferor holds at the relevant time;

but it applies only if an amount of field allowance for the new oil field (“the
relevant amount”) has, by virtue of section 344, been activated in respect of the
reference period that ends because of the disposal.
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(5)
When making the determination, the relevant amount of the field allowance
must be treated as having been activated at a time before the relevant time.
(6)
In a case where a company has three or more different shares of the equity in a
new oil field during a particular day, sections 346 and 347 (in particular
provisions relating to the beginning or end of a day) have effect subject to the
20
necessary modifications.
346
Reduction of field allowance if equity disposed of
(1)
The unactivated amount of the field allowance for the new oil field which the
transferor holds immediately before the disposal is to be reduced by the
following amount—

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where—
F is the unactivated amount of the field allowance which the transferor
holds immediately before the disposal,
E1 is the transferor’s share of the equity in the new oil field immediately
before the disposal, and
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E2 is the transferor’s share of the equity in the new oil field immediately
after the disposal.
(2)
This section has effect at the end of the day on which the disposal takes place.
347
Acquisition of field allowance if equity acquired
(1)
If a transferee holds a field allowance for the new oil field immediately before
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the disposal, the unactivated amount of the field allowance is to be increased
by the amount calculated in accordance with subsection (4).
(2)
If a transferee does not hold a field allowance for the new oil field immediately
before the disposal, the transferee is to hold a field allowance for the new oil
field.
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