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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.

5

(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.

10

(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

25

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).

30

(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

40

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

45

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

10

(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.

15

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

25

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

30

(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

10

(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—

20

   

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

5

   

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

30

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—

5

   

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.

10

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

15

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.

5

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—

10

(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

30

(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

5

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

10

(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.

15

(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—

25

   

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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