305 Group relief and group relief for carried-forward losses
(1) On a claim for group relief made by a claimant company in relation to a surrendering company, group relief may not be allowed against the claimant company's ring fence profits except so far as the claim relates to losses incurred by the surrendering company that arose from oil extraction activities or from oil rights.
(1A) On a claim under Chapter 3 of Part 5A, group relief for carried-forward losses may not be allowed against the claimant company's ring fence profits.
(2) In section 105 (restriction on surrender of losses etc within section 99(1)(d) to (g)) the references to the surrendering company's gross profits of the surrender period do not include the company's relevant ring fence profits for that period.
(3) The company's “relevant ring fence profits” for that period are—
(a) if for that period there are no qualifying charitable donations made by the company that are allowable under Part 6 (charitable donations relief), the company's ring fence profits for that period, or
(b) otherwise, so much of the company's ring fence profits for that period as exceeds the amount of the qualifying charitable donations made by the company that are allowable under section 189 for that period.
(4) In this section—
“claimant company” is to be read in accordance with Part 5 (see section 188) or Part 5A (see sections 188CB(2) and 188CC(2)), as the case requires;
“surrendering company” is to be read in accordance with Part 5 (see section 188).
(1) A capital allowance may not to any extent be given effect under section 259 or 260 of CAA 2001 (special leasing) by deduction from a company's ring fence profits.
(2) But subsection (1) does not apply to a capital allowance which falls to be made to a company for any accounting period in respect of an asset which—
(a) is used in the relevant accounting period by a company associated with it, and
(b) is so used in carrying on oil extraction activities.
(3) “The relevant accounting period” means that for which the allowance in question first falls to be made to the company (whether or not it can to any extent be given effect in that period under section 259 of CAA 2001).
(1) This Chapter entitles a company carrying on a ring fence trade, on making a claim in respect of an accounting period, to a supplement in respect of—
(a) qualifying pre-commencement expenditure incurred before the trade is set up and commenced,
(b) losses incurred in the trade, and
(c) some or all of the supplement allowed in respect of earlier periods.
(2) Sections 308 to 314 make provision about the application and interpretation of this Chapter.
(3) Sections 315 to 320 make provision about supplement in relation to expenditure incurred by the company—
(a) with a view to carrying on a ring fence trade, but
(b) in an accounting period before the company sets up and commences that trade.
(4) Sections 321 to 329 make provision about supplement in relation to losses incurred in carrying on the ring fence trade.
(5) There is a limit (of 10) on the number of accounting periods in respect of which a company may claim supplement.
(6) In determining the amount of supplement allowable, reductions fall to be made in respect of—
(a) disposal receipts in respect of any asset representing qualifying pre-commencement expenditure.
(b) ring fence losses that could be deducted under section 37 (relief for trade losses against total profits) or section 42 (ring fence trades: further extension of period for relief) from ring fence profits of earlier periods,
(c) relief given under sections 45, 45B, 303B, 303C and 303D for ring fence losses carried forward from earlier periods,
(d) unrelieved group ring fence profits.
(1) This Chapter applies in relation to any company which—
(a) carries on a ring fence trade, or
(b) is engaged in any activities with a view to carrying on a ring fence trade.
(2) In this Chapter such a company is referred to as a “qualifying company”.
(1) In this Chapter, in the case of a qualifying company—
“the commencement period” means the accounting period in which the company sets up and commences its ring fence trade,
“post-commencement period” means an accounting period beginning on or after 1 January 2006—
which is the commencement period, or
which ends after the commencement period, and
“pre-commencement period” means an accounting period—
beginning on or after 1 January 2006, and
ending before the commencement period.
(2) For the purposes of this Chapter, a company not within the charge to corporation tax which incurs any expenditure is to be treated as having such accounting periods as it would have if—
(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 activities in the course of which the expenditure is incurred.
(3) In the case of an accounting period (a “straddling period”) of a qualifying company beginning before 1 January 2006 and ending on or after that date—
(a) so much of the straddling period as falls before 1 January 2006, and
(b) so much of the straddling period as falls on or after that date,
are treated as separate accounting periods for the purposes of this Chapter.
(4) But special provision is made elsewhere in this Chapter—
(a) in relation to straddling periods (see sections 311, 324 and 327(4) to (7)), and
(b) in relation to accounting periods which begin before, but end on or after, 5 December 2013 (see sections 311(1C), 318A and 328A).
(1) For the purposes of this Chapter, the relevant percentage for an accounting period is 10%.
(2) The Treasury may by order vary the percentage for the time being specified in subsection (1) for such accounting periods as may be specified in the order.
311 Limit on number etc of accounting periods for which supplement may be claimed
(1) A company may claim supplement under this Chapter in respect of no more than 10 accounting periods.
(1A) In this Chapter—
“the initial 6 periods” means the first 6 accounting periods (in chronological order) for which the company claims supplement under this Chapter;
“the additional 4 periods” means the 4 accounting periods after the initial 6 periods for which the company claims supplement under this Chapter.
(1B) None of the additional 4 periods may be accounting periods beginning before 5 December 2013.
(1C) But, where—
(a) a company has an accounting period which begins before 5 December 2013 and ends on or after that date, and
(b) that accounting period falls after the initial 6 accounting periods,
so much of that accounting period as falls before 5 December 2013 and so much of it as falls on or after that date are treated as separate accounting periods for the purposes of this Chapter.
(2) The accounting periods in respect of which claims are made need not be consecutive.
(3) A claim for supplement by the company under Schedule 19B to ICTA (exploration expenditure supplement) in respect of an accounting period is to count for the purposes of this section as a claim for supplement under this Chapter in respect of that accounting period.
(4) But, if the company makes a claim for supplement under this Chapter in respect of the deemed accounting period, any claim for supplement by the company under Schedule 19B to ICTA in respect of the Schedule 19B deemed accounting period is to be ignored for the purposes of this section.
(5) In subsection (4)—
“the deemed accounting period” means the deemed accounting period under section 309(3) beginning on 1 January 2006, and
“the Schedule 19B deemed accounting period” means the deemed accounting period under paragraph 3(3) of Schedule 19B to ICTA ending before 1 January 2006.
(1) For the purposes of this Chapter, expenditure is “qualifying pre-commencement expenditure” if it meets each of conditions A to D.
(2) Condition A is that the expenditure is incurred on or after 1 January 2006.
(3) Condition B is that the expenditure is incurred in the course of oil extraction activities.
(4) Condition C is that the expenditure is incurred by a company with a view to carrying on a ring fence trade but before the company sets up and commences the ring fence trade.
(5) Condition D is that the expenditure—
(a) is subsequently allowable as a deduction in calculating the profits of the ring fence trade for the commencement period (whether or not any part of it is so allowable for any post-commencement period), or
(b) is relevant R&D expenditure incurred by an SME.
(6) For the purposes of this section, expenditure incurred by a company is “relevant R&D expenditure incurred by an SME” if—
(a) the company makes an election under section 1045 of CTA 2009 (alternative treatment for pre-trading expenditure: deemed trading loss) in respect of that expenditure, but
(b) the company does not make a claim for an R&D tax credit under section 1054 of that Act in respect of that expenditure.
(7) In the case of any qualifying pre-commencement expenditure which is relevant R&D expenditure incurred by an SME, the amount of that expenditure is treated for the purposes of this Chapter as being equal to 150% of its actual amount.
(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
313 Unrelieved group ring fence profits for accounting periods
(1) There is an amount of unrelieved group ring fence profits for an accounting period of a qualifying company (“company Q”) if—
(a) the company and any other company (“company X”) are members of the same group, and
(b) company X has an amount of taxable ring fence profits (see section 314) for a corresponding accounting period.
(2) An accounting period of company X corresponds to an accounting period of company Q if—
(a) it coincides with, or falls wholly within, the accounting period of company Q, or
(b) it falls partly within the accounting period of company Q.
(3) If an accounting period of company X—
(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.
(4) If 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 taxable ring fence profits for its accounting period that is attributable, on an apportionment in accordance with section 1172, to the part of that period which falls within the accounting period of company Q.
(5) For the purposes of this section, two companies are members of the same group if they are members of the same group of companies within the meaning of Part 5 (group relief).
(6) This section applies for the purposes of this Chapter.
314 Taxable ring fence profits for an accounting period
For the purposes of this Chapter, a company has taxable ring fence profits for an accounting period if it has an amount of ring fence profits which is chargeable to corporation tax for that accounting period after any group relief claimed under Part 5 (group relief).
315 Supplement in respect of a pre-commencement accounting period
(1) If—
(a) a qualifying company incurs qualifying pre-commencement expenditure in respect of a ring fence trade, and
(b) the expenditure is incurred before the commencement period,
the company may claim supplement under this section (“pre-commencement supplement”) in respect of one or more pre-commencement periods.
(2) Any pre-commencement supplement allowed on a claim in respect of a pre-commencement period is to be treated as expenditure—
(a) which is incurred by the company in the commencement period, and
(b) which is allowable as a deduction in calculating the profits of the ring fence trade for that period.
(3) The amount of the supplement for any pre-commencement period in respect of which a claim under this section is made is the relevant percentage for that period of the reference amount for that period.
(4) If the pre-commencement period is a period of less than 12 months, the amount of the supplement for the period (apart from this subsection) is to be reduced proportionally.
(5) Sections 316 to 319 have effect for the purpose of determining the reference amount for a pre-commencement period.
316 The mixed pool of qualifying pre-commencement expenditure and supplement previously allowed
(1) For the purpose of determining the amount of any pre-commencement supplement, a qualifying company is to be taken to have had, at all times in the pre-commencement periods of the company, a continuing mixed pool of—
(a) the relevant amount (if any) which the company carries forward under Schedule 19B to ICTA,
(b) qualifying pre-commencement expenditure, and
(c) pre-commencement supplement.
(2) The pool is to be taken to have consisted of—
(a) the relevant amount (if any) which the company carries forward under Schedule 19B to ICTA,
(b) the company's qualifying pre-commencement expenditure, allocated to the pool for each pre-commencement period in accordance with subsection (3), and
(c) the company's pre-commencement supplement, allocated to the pool for each pre-commencement period in accordance with subsection (4).
(3) To allocate qualifying pre-commencement expenditure to the pool for any pre-commencement period, take the following steps—
Step 1
Count as eligible expenditure for that period so much of the qualifying pre-commencement expenditure mentioned in section 315(1) as was incurred in that period.
Step 2
Find the total of all the eligible expenditure for that period (amount E).
Step 3
If section 317 applies, reduce amount E in accordance with that section.
Step 4
If section 318 applies, reduce (or, as the case may be, further reduce) amount E in accordance with that section.
And so much of amount E as remains after making those reductions is to be taken to have been added to the pool in that period
(4) If any pre-commencement supplement is allowed on a claim in respect of a pre-commencement period, the amount of that supplement is to be taken to have been added to the pool in that period.
(5) In this section references to the relevant amount (if any) which the company carries forward under Schedule 19B to ICTA are to the amount (if any) in its mixed pool for the purposes of Part 3 of Schedule 19B to ICTA immediately before 1 January 2006.
(6) This section is subject to section 318A (adjustment of pool to remove pre-2013 expenditure after the initial 6 periods).
317 Reduction in respect of disposal receipts under CAA 2001
(1) This section applies in the case of the qualifying company if—
(a) it incurs qualifying pre-commencement expenditure in respect of a ring fence trade in any pre-commencement period,
(b) it would, on the relevant assumption, be entitled to an allowance under any provision of CAA 2001 in respect of that expenditure,
(c) an event occurs in relation to any asset representing the expenditure in any pre-commencement period, and
(d) the event would, on the relevant assumption, require a disposal value (the “deductible amount”) to be brought into account under any provision of CAA 2001 for any pre-commencement period.
(2) The relevant assumption is that the company was carrying on the ring fence trade—
(a) when the expenditure was incurred, and
(b) when the event giving rise to the disposal value occurred.
(3) For the purpose of allocating qualifying pre-commencement expenditure to the pool for each pre-commencement period—
(a) find the total amount of the disposal values in the case of all such events (amount D), and
(b) taking later periods before earlier periods, reduce (but not below nil) amount E for any pre-commencement period by setting against it so much of amount D as does not fall to be set against amount E for a later pre-commencement period.
(4) This section is subject to section 318A(5) (exclusion of deductible amounts in respect of pre-2013 expenditure when determining pre-commencement supplement for additional 4 periods).
318 Reduction in respect of unrelieved group ring fence profits
(1) This section applies if there is an amount of unrelieved group ring fence profits for a pre-commencement period.
(2) For the purpose of allocating qualifying pre-commencement expenditure to the pool for that period—
(a) find so much (if any) of amount E for that period as remains after any reduction falling to be made under section 317, and
(b) reduce that amount (but not below nil) by setting against it a sum equal to the aggregate of the amounts of unrelieved group ring fence profits for the period.
318A Adjustment of pool to remove pre-2013 expenditure after the initial 6 periods
(1) This section applies for the purposes of determining the amount of any pre-commencement supplement on any claim made by a company for supplement under this Chapter in respect of an accounting period which is one of the additional 4 periods.
(2) The pool which (under section 316) the company is to be taken to have had, at all times in the pre-commencement periods of the company, is to be taken to have been reduced at the time specified in subsection (4).
(3) The amount of the reduction is the sum of—
(a) the relevant amount (if any) which the company carries forward under Schedule 19B to ICTA,
(b) the total amount of qualifying pre-commencement expenditure allocated to the pool for pre-commencement periods beginning before 5 December 2013, and
(c) the total amount of the company's pre-commencement supplement allocated to the pool for pre-commencement periods beginning before that date.
(4) The time is—
(a) immediately after the last of the initial 6 periods, or
(b) if later, 5 December 2013.
(5) Subsection (3) of section 317 (reduction in respect of disposal receipts under CAA 2001) has effect as if the reference in paragraph (a) of that subsection to “all such events” did not include events occurring in relation to an asset representing expenditure incurred before 5 December 2013.
(6) Where a company has a pre-commencement period (“the straddling 2013 period”) which begins before 5 December 2013 and ends on or after that date, for the purposes of making a reduction under this section—
(a) so much of the straddling 2013 period as falls before 5 December 2013 (“the pre-2013 period”), and
(b) so much of that period as falls on or after that date (“the post-2013 period”),
are to be treated as separate pre-commencement periods.
(7) Accordingly, any amount of qualifying pre-commencement expenditure, and any amount of the company's pre-commencement supplement, allocated to the pool for the straddling 2013 period is to be—
(a) apportioned between the pre-2013 period and the post-2013 period in proportion to the number of days in each, and
(b) treated as allocated to the pool in question for the period in question (rather than the straddling 2013 period).
(8) If the basis of the apportionment in subsection (7) would work unjustly or unreasonably in the company's case, the company may elect for the apportionment to be made on another basis that is just and reasonable and specified in the election.
319 The reference amount for a pre-commencement period
For the purposes of section 315, the reference amount for a pre-commencement period is the amount in the pool at the end of the period—
(a) after the addition to the pool of any qualifying pre-commencement expenditure allocated to the pool for that period in accordance with section 316(3), but
(b) before determining, and adding to the pool, the amount of any pre-commencement supplement claimed in respect of the period.
(1) Any claim for pre-commencement supplement in respect of a pre-commencement period must be made as a claim for the commencement period.
(2) Paragraph 74 of Schedule 18 to FA 1998 (company tax returns etc: time limit for claims for group relief) applies in relation to a claim for pre-commencement supplement as it applies in relation to a claim for group relief.
321 Supplement in respect of a post-commencement period
(1) A qualifying company which incurs a ring fence loss (see section 323) in any post-commencement period may claim supplement under this section (“post-commencement supplement”) in respect of—
(a) that period, or
(b) any subsequent accounting period in which it carries on its ring fence trade.
(2) Any post-commencement supplement allowed on a claim in respect of a post-commencement period beginning before 1 April 2017 is to be treated for the purposes of the Corporation Tax Acts (other than the post-commencement supplement provisions or Part 4 of Schedule 19B to ICTA) as if it were a loss—
(a) which is incurred in carrying on the ring fence trade in that period, and
(b) which falls in whole to be used under section 45 (carry forward of pre-1 April 2017 trade loss against subsequent trade profits) to reduce trading income from the ring fence trade in succeeding accounting periods.
(2A) Any post-commencement supplement allowed on a claim in respect of a post-commencement period beginning on or after 1 April 2017 is to be treated for the purposes of the Corporation Tax Acts (other than the post-commencement supplement provisions or Part 4 of Schedule 19B to ICTA) as if it were a loss—
(a) which is incurred in carrying on the ring fence trade in that period, and
(b) which falls in whole to be used under section 45B (carry forward of post-1 April 2017 trade loss against subsequent trade profits) to reduce trading income from the ring fence trade in succeeding accounting periods.
(3) Paragraph 74 of Schedule 18 to FA 1998 (company tax returns etc: time limit for claims for group relief) applies in relation to a claim for post-commencement supplement as it applies in relation to a claim for group relief.
(4) In this Chapter “the post-commencement supplement provisions” means this section and sections 322 to 329.
322 Amount of post-commencement supplement for a post-commencement period
(1) The amount of the post-commencement supplement for any post-commencement period in respect of which a claim under section 321 is made is the relevant percentage for that period of the reference amount for that period.
(2) If the post-commencement period is a period of less than 12 months, the amount of the supplement for the period (apart from this subsection) is to be reduced proportionally.
(3) Sections 325 to 329 have effect for the purpose of determining the reference amount for a post-commencement period.
(1) If—
(a) in any post-commencement period (“the period of the loss”) a qualifying company carrying on a ring fence trade incurs a loss in the trade, and
(b) some or all of the loss falls to be carried forward to the following accounting period under section 45, 45B or 303B (carry forward of trade losses against subsequent profits)
so much of the loss as falls to be so carried forward is a “ring fence loss” of the company.
(2) In determining for the purposes of the post-commencement supplement provisions how much of a loss incurred in a ring fence trade falls to be carried forward as mentioned in subsection (1)(b), the following assumptions are to be made.
(3) The first assumption is that every claim is made that could be made by the company under section 37 (relief for trade losses against total profits) to deduct losses incurred in the ring fence trade from ring fence profits of earlier post-commencement periods.
(4) The second assumption is that (where appropriate) section 42 (ring fence trades: further extension of period for relief) applies in relation to every such claim under section 37.
(5) This section is subject to section 324 (special rule for straddling periods).
(6) This section has effect for the purposes of the post-commencement supplement provisions.
(1) This section applies if the period of the loss is the deemed accounting period under section 309(3) beginning on 1 January 2006 (“the deemed accounting period”).
(2) The amount of ring fence loss in the deemed accounting period is determined as follows—
Step 1
Calculate so much of the ring fence loss in the straddling period as, for the purposes of Part 4 of Schedule 19B to ICTA, is attributable to qualifying E&A allowances for the straddling period. The amount given by this step is “the qualifying Schedule 19B amount”.
Step 2
Calculate so much of the ring fence loss in the straddling period as is attributable to allowances for the straddling period under Part 6 of CAA 2001 in respect of relevant expenditure. For the purposes of this step “relevant expenditure” means expenditure incurred by the company on or after 1 January 2006 which, but for that fact, would be qualifying E&A expenditure for the purposes of Schedule 19B to ICTA. For the purposes of this step a ring fence loss is attributable to those allowances so far as the amount of the loss (less the qualifying Schedule 19B amount) does not exceed the amount of those allowances for that period. The amount given by this step is “the amount of the post-1 January 2006 E&A allowances”.
Step 3
Deduct the qualifying Schedule 19B amount and the amount of the post-1 January 2006 E&A allowances from the amount of the ring fence loss in the straddling period.
Step 4
Apportion the remaining amount of that loss (if any) to the deemed accounting period in proportion to the number of days in the deemed accounting period that fall in the straddling period. The amount given by this step is “the amount of the apportioned loss”
Step 5
The amount of the ring fence loss in the deemed accounting period is the amount of the apportioned loss plus the amount of the post-1 January 2006 E&A allowances.
(3) In this section “the straddling period”, in relation to a qualifying company, means an accounting period of the company—
(a) beginning before 1 January 2006, and
(b) ending on or after that date,
disregarding section 309(3).
(4) In this section references to the ring fence loss in the straddling period are to that loss determined on the assumption that the straddling period is the period of the loss for the purposes of section 323.
(5) This section has effect for the purposes of the post-commencement supplement provisions.
325 The pool of ring fence losses and the pool of non-qualifying Schedule 19B losses
(1) For the purpose of determining the amount of any post-commencement supplement, a qualifying company is to be taken at all times in its post-commencement periods to have a continuing mixed pool (the “ring fence pool”) of—
(a) the carried forward qualifying Schedule 19B amount (if any),
(b) the company's ring fence losses, and
(c) post-commencement supplement.
(2) The ring fence pool continues even if the amount in it is nil.
(3) For the purpose of determining the amount of any post-commencement supplement, a qualifying company is also to be taken in its post-commencement periods to have a non-qualifying pool consisting of the carried forward non-qualifying Schedule 19B amount.
(4) But the non-qualifying pool ceases to exist when the amount in it is reduced to nil.
(5) In this section—
“the carried forward qualifying Schedule 19B amount”, in relation to a qualifying company, means the amount in its qualifying pool for the purposes of Part 4 of Schedule 19B to ICTA immediately before 1 January 2006, and
“the carried forward non-qualifying Schedule 19B amount”, in relation to a qualifying company, means the amount in its non-qualifying pool for the purposes of Part 4 of Schedule 19B to that Act immediately before 1 January 2006.
(1) The ring fence pool consists of—
(a) the carried forward qualifying Schedule 19B amount (if any),
(b) the company's ring fence losses, allocated to the pool in accordance with subsection (2)(a), and
(c) the company's post-commencement supplement, allocated to the pool in accordance with subsection (2)(b).
(2) The allocation of ring fence losses and post-commencement supplement to the pool is made as follows—
(a) the amount of a ring fence loss is added to the pool in the period of the loss, and
(b) if any post-commencement supplement is allowed on a claim in respect of a post-commencement period, the amount of that supplement is added to the pool in that period.
(3) The amount in the ring fence pool is subject to reductions in accordance with sections 327 and 328.
(4) If a reduction in the amount in the ring fence pool falls to be made under section 327 or 328 in any accounting period, the reduction is to be made—
(a) after the addition to the pool of the amount of any ring fence losses allocated to the pool in that period in accordance with subsection (2)(a), but
(b) before determining, and adding to the pool, the amount of any supplement claimed in respect of the period,
and references to the amount in the pool are to be read accordingly.
(5) In this section “the carried forward qualifying Schedule 19B amount”, in relation to a qualifying company, means the amount in its qualifying pool for the purposes of Part 4 of Schedule 19B to ICTA immediately before 1 January 2006.
(6) This section is subject to section 328A (adjustment of pool to remove pre-2013 losses after the initial 6 periods).
327 Reductions in respect of relief for carried-forward ring fence losses
(1) Reductions are to be made in accordance with this section in a post-commencement period if the relevant amount for the period (see subsection (4)) is not nil.
(2) If the company has a non-qualifying pool, the amount in the non-qualifying pool is to be reduced (but not below nil) by setting against it a sum equal to the relevant amount for the post-commencement period.
(3) If—
(a) any of that sum remains after being so set against the amount in the non-qualifying pool, or
(b) the company does not have a non-qualifying pool,
the amount in the ring fence pool is to be reduced (but not below nil) by setting against it so much of that sum as so remains or (as the case may be) a sum equal to the relevant amount for the post-commencement period.
(4) For the purposes of this section, the relevant amount for a post-commencement period is the sum of—
(a) the amount of any relief given in respect of ring fence losses in the post-commencement period under sections 45, 45B, 303B, 303C and 303D, and
(b) the amount of any relief prevented from being given in respect of ring fence losses in the post-commencement period by claims made under sections 45(4A) and 45B(5).
328 Reductions in respect of unrelieved group ring fence profits
(1) If there is an amount of unrelieved group ring fence profits for a post-commencement period, reductions are to be made in that period in accordance with this section.
(2) If, after making any reductions that fall to be made in accordance with section 327, the company does not have a non-qualifying pool, the remaining amount in the ring fence pool is to be reduced (but not below nil) by setting against it a sum equal to the aggregate of the amounts of unrelieved group ring fence profits for the period.
(3) If, after making any reductions that fall to be made in accordance with section 327, the company has an amount in a non-qualifying pool, the amount in that pool is to be reduced (but not below nil) by setting against it a sum equal to the aggregate of the amounts of unrelieved group ring fence profits for the period.
(4) If any of that sum remains after being so set against the amount in the non-qualifying pool, the remaining amount in the ring fence pool is to be reduced (but not below nil) by setting against it so much of that sum as so remains.
(5) For the purposes of this section references to the remaining amount in the ring fence pool are references to so much (if any) of the amount in the ring fence pool as remains after making any reductions that fall to be made in accordance with section 327.
328A Adjustment of pool to remove pre-2013 losses after the initial 6 periods
(1) This section applies for the purposes of determining the amount of any post-commencement supplement on any claim in respect of any of the additional 4 periods.
(2) The ring fence pool is to be taken to have been reduced at the time specified in subsection (6).
(3) The amount of the reduction is the amount of the total pre-2013 pool reduced (but not below nil) by the amount of the total pre-2013 reduction.
(4) “The amount of the total pre-2013 pool” means the sum of—
(a) the carried forward qualifying Schedule 19B amount (within the meaning of section 326(5)) which is in the pool at the time specified in subsection (6) (if any),
(b) the total amount of the company's ring fence losses added to the pool in post-commencement periods beginning before 5 December 2013,
(c) if the commencement period begins on or after 5 December 2013, so much of any ring fence loss added to the pool in that period as does not exceed the sum of—
(i) any pre-commencement expenditure added to the pool in a pre-commencement period ending before 5 December 2013, and
(ii) any pre-commencement supplement allowed in respect of such a pre-commencement period, and
(d) the total amount of the company's post-commencement supplement added to the pool in post-commencement periods beginning before that date.
(5) “The amount of the total pre-2013 reduction” means the total amount of the reductions in the ring fence pool falling to be made under section 327 or 328 in post-commencement periods beginning before the time specified in subsection (6).
(6) The time is—
(a) immediately after the last of the 6 initial periods, or
(b) if later, 5 December 2013.
(7) The amount (if any) in the non-qualifying pool under section 325(3) is reduced to nil (and so ceases to exist under section 325(4)).
(8) Section 318A(6) (“the straddling 2013 period”) applies for the purposes of making a reduction under this section as it applies for the purposes of making a reduction under section 318A.
(9) Accordingly—
(a) any ring fence loss of the company added to the pool in the straddling 2013 period is to be apportioned between the pre-2013 period and the post-2013 period in proportion to the number of days in each and treated as allocated to the pool for the period in question;
(b) any amount of the company's post-commencement supplement allocated to the pool for the straddling period is to be apportioned between the pre-2013 period and the post-2013 period in proportion to the number of days in each and treated as allocated to the pool for the period in question;
(c) the total amount of reductions in the ring fence pool falling to be made in the straddling period is apportioned between the pre-2013 period and the post-2013 period in proportion to the number of days in each and treated as a reduction falling to be made in the period in question.
(10) If the basis of the apportionment in subsection (9)(a), (b) or (c) would work unjustly or unreasonably in the company's case, the company may elect for the apportionment to be made on another basis that is just and reasonable and specified in the election.
(11) Once a reduction in the pool has been made under this section—
(a) no account is to be taken of a loss in determining under section 327(4) the relevant amount for a post-commencement period if and to the extent that the loss is represented by the reduction made under this section, and
(b) if and to the extent that losses are represented by the reduction they are to be used under section 45 to reduce any profits of a post-commencement period before any such profits are reduced by the use under section 45, 45B, 303B, 303C and 303D of ring fence losses that are not represented by the reduction.
329 The reference amount for a post-commencement period
For the purposes of section 322 the reference amount for a post-commencement period is so much of the amount in the ring fence pool as remains after making any reductions required by section 327 or 328.
330 Supplementary charge in respect of ring fence trades
(1) If a company carries on a ring fence trade in an accounting period, a sum equal to 10% of its adjusted ring fence profits for that period is to be charged on the company as if it were an amount of corporation tax chargeable on the company.
(2) A company's “adjusted ring fence profits” for an accounting period are the amount which, on the assumption mentioned in subsection (3), would be determined for that period as the company's ring fence profits chargeable to corporation tax.
See also sections 330A and 330B (which provide for the amount of adjusted ring fence profits to be further adjusted where decommissioning expenditure has been taken into account).
(3) The assumption is that financing costs are left out of account in calculating—
(a) the amount of the profits or loss of any ring fence trade of the company for an accounting period, and
(b) if for any such period the whole or part of any loss relief is surrendered to the company in accordance with section 305(1), the amount of that relief or part.
(4) See also section 331 (meaning of financing costs etc).
(5) This Chapter is subject to—
(a) Chapter 6A (reduction of supplementary charge: investment allowance),
(b) Chapter 8 (reduction of supplementary charge: onshore allowance), and
(c) Chapter 9 (reduction of supplementary charge: cluster area allowance).
(1) In this section “relieving Chapter” means any of the following—
(a) Chapter 6A (reduction of supplementary charge: investment allowance);
(b) Chapter 8 (reduction of supplementary charge: onshore allowance);
(c) Chapter 9 (reduction of supplementary charge: cluster area allowance).
(2) Where a company has allowances under more than one relieving Chapter available for reducing the adjusted ring fence profits that are to be chargeable under section 330(1) for an accounting period, the company may choose the order in which the relieving Chapters in question are to be applied.
(3) In any relieving Chapter, “adjusted ring fence profits”, in relation to a company and an accounting period, means the adjusted ring fence profits which would (ignoring all relieving Chapters except those which the company chooses to apply before that Chapter) be taken into account in calculating the supplementary charge on the company under section 330(1) for the accounting period.
330A Decommissioning expenditure taken into account in calculating ring fence profits
(1) This section applies where—
(a) any decommissioning expenditure is taken into account in calculating the amount mentioned in paragraph (a) of subsection (3) of section 330 or the amount mentioned in paragraph (b) of that subsection, and
(b) if that expenditure were not so taken into account, the amount of the adjusted ring fence profits of the company for the accounting period would be greater than nil.
(2) In calculating for the purposes of section 330(1) the amount of the adjusted ring fence profits of the company for the accounting period, there is to be added an amount equal to the appropriate fraction of the used-up amount of that expenditure.
(3) For the purposes of this section—
“the appropriate fraction” is
SC – 20 % SC
where SC is the percentage specified in section 330(1) for the accounting period, and
“the used-up amount”, in relation to any expenditure, is the difference between—
the adjusted ring fence profits of the company for the accounting period determined in the absence of this section (which may be nil), and
what the adjusted ring fence profits of the company for that accounting period would be if that expenditure were not taken into account as mentioned in subsection (1).
(4) In determining for the purposes of this section whether, and to what extent, any losses which have been taken into account as mentioned in subsection (1) are attributable to decommissioning expenditure—
(a) assume that any amounts of any other expenditure which could be taken into account in calculating those losses are taken into account before any amounts of decommissioning expenditure, and
(b) where any losses have been surrendered in accordance with Part 5, the company must specify, in accordance with a basis determined jointly by the company, the surrendering company (if different) and any other claimant company, whether any of those losses is attributable to decommissioning expenditure.
(5) But if paragraph (a) of subsection (4) would work unfavourably in the company's case, the company may elect for that paragraph not to apply in relation to it and for any amounts of expenditure which could be taken into account in calculating those losses instead to be taken into account in the order specified in the election.
(6) In determining for the purposes of this section the used-up amount of decommissioning expenditure, assume that any other amounts that could be deducted in calculating the adjusted ring fence profits of the company for the accounting period have already been so deducted.
(7) But if subsection (6) would work unfavourably in the company's case, the company may elect for that subsection not to apply in relation to it and for any amounts that could be deducted in calculating those adjusted ring fence profits instead to be deducted in the order specified in the election.
(8) For the purposes of this section, any deduction made under section 330B is to be disregarded.
(9) This section does not apply in relation to any accounting period for which the percentage specified in section 330(1) is less than or equal to 20% (including any accounting period beginning before 24 March 2011 and ending on or after that date).
(10) In this section—
“claimant company” and “surrendering company” are to be read in accordance with Part 5 (see section 188), and
“decommissioning expenditure” has the meaning given by section 330C.
330B Decommissioning expenditure taken into account for PRT purposes
(1) This section applies where—
(a) any decommissioning expenditure is taken into account in calculating the assessable profit accruing to a participator in any chargeable period from an oil field, ...
(b) if that expenditure were not so taken into account, the amount of petroleum revenue tax with which the participator would be chargeable in respect of the field for the chargeable period would be greater than nil.
, and
(c) an amount equal to the appropriate fraction of the used-up amount of that expenditure is added under section 330A(2) in calculating the participator's adjusted ring fence profits for an accounting period.
(2) In calculating for the purposes of section 330(1) the amount of the participator's adjusted ring fence profits for the accounting period, there is to be deducted the amount given by—
RP × AF × D
where—
RP is the relevant percentage of the decommissioning expenditure,
AF is the appropriate fraction, and
D is the PRT difference.
(3) For the purposes of this section—
“the relevant percentage of the decommissioning expenditure” is the percentage of that expenditure that is the used-up amount referred to in subsection (1)(c),
“the appropriate fraction” is
SC – 20 % SC
where SC is the percentage specified in section 330(1) for the ... accounting period, and
“the PRT difference” is the difference between—
the amount of petroleum revenue tax with which the participator is chargeable for the chargeable period (which may be nil), and
the amount of petroleum revenue tax with which the participator would be chargeable for that chargeable period if the decommissioning expenditure were not taken into account as mentioned in subsection (1)(a) .
(4) In determining for the purposes of this section whether, and to what extent, any allowable losses which have been taken into account as mentioned in subsection (1)(a) are attributable to decommissioning expenditure, assume that any amounts of any other expenditure which could be taken into account in calculating those losses are taken into account before any amounts of decommissioning expenditure.
(5) But if subsection (4) would work unfavourably in the participator's case, the participator may elect for that subsection not to apply in relation to it and for any amounts of expenditure which could be taken into account in calculating those losses instead to be taken into account in the order specified in the election.
(6) This section does not apply in relation to any accounting period for which the percentage specified in section 330(1) is less than or equal to 20% (including any accounting period beginning before 24 March 2011 and ending on or after that date).
(7) In this section—
“assessable profit” and “allowable loss” have the same meaning as in Part 1 of OTA 1975 (see section 2 of that Act),
“decommissioning expenditure” has the meaning given by section 330C, and
...
“the used-up amount”, in relation to any expenditure, has the same meaning as in section 330A (see subsection (3) of that section).
(1) In sections 330A and 330B “decommissioning expenditure” means expenditure incurred in connection with—
(a) demolishing any plant or machinery,
(b) preserving any plant or machinery pending its reuse or demolition,
(c) preparing any plant or machinery for reuse,
(d) arranging for the reuse of any plant or machinery, or
(e) the restoration of any land.
(2) It is immaterial for the purposes of subsection (1)(b) whether the plant or machinery is reused, is demolished or is partly reused and partly demolished.
(3) It is immaterial for the purposes of subsection (1)(c) and (d) whether the plant or machinery is in fact reused.
(4) In subsection (1)(e) “restoration” includes landscaping.
(5) The Treasury may by order amend this section.
(6) An order under subsection (5) may include transitional provision and savings.
(1) This section applies for the purposes of section 330.
(2) “Financing costs” means the costs of debt finance.
(3) In calculating the costs of debt finance for an accounting period the matters to be taken into account include—
(a) any costs giving rise to debits in respect of debtor relationships of the company under Part 5 of CTA 2009 (loan relationships), other than debits in respect of exchange losses from such relationships,
(b) any exchange gain or loss from a debtor relationship of the company in relation to debt finance,
(c) any credit or debit falling to be brought into account in accordance with Part 7 of CTA 2009 (derivative contracts) in relation to debt finance,
(d) the financing cost implicit in a payment under a finance lease,
(da) if the company is the lessee under a right-of-use lease which is a long funding finance lease, any costs falling, in accordance with generally accepted accounting practice, to be treated in the accounts of the company as interest expenses,
(e) if the company is the lessee under a long funding operating lease, the amount deductible in respect of payments under the lease in calculating the profits of the lessee for corporation tax purposes (after first making against any such amount any reductions falling to be made as a result of section 379 (lessee under long funding operating lease)), and,
(f) any other costs arising from what would be considered in accordance with generally accepted accounting practice to be a financing transaction.
(4) If an amount representing the whole or part of a payment falling to be made by a company—
(a) falls (or would fall) to be treated as a finance charge, or an interest expense, under a finance lease for the purposes of accounts which relate to that company and one or more other companies and are prepared in accordance with generally accepted accounting practice, but
(b) is not so treated in the accounts of the company,
the amount is to be treated as a financing cost within subsection (3)(d).
(5) If—
(a) in calculating the adjusted ring fence profits of a company for an accounting period, an amount falls to be left out of account as a result of subsection (3)(d), but
(b) the whole or any part of that amount is repaid,
the repayment is also to be left out of account in calculating the adjusted ring fence profits of the company for any accounting period.
(6) In this section “finance lease” means a lease which—
(a) under generally accepted accounting practice—
(i) falls (or would fall) to be treated, in the accounts of the lessee or a person connected with the lessee, as a finance lease or loan, or
(ii) is comprised in arrangements which fall (or would fall) to be so treated, or
(b) if the lease is a right-of-use lease—
(i) would fall to be treated in those accounts as a finance lease, or
(ii) is comprised in arrangements which would fall to be so treated,
were the lessee or person connected with the lessee required under generally accepted accounting practice to determine whether the lease falls, or arrangements fall, to be so treated.
(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.
(9) In this section—
“accounts”, in relation to a company, includes accounts which—
relate to two or more companies of which that company is one, and
are drawn up in accordance with generally accepted accounting 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, ...
“lease” means any arrangements which provide for an asset to be leased or otherwise made available by a person to another person (“the lessee”), and
“long funding finance lease”, “long funding operating lease” and “right-of-use lease” have the meanings given in Part 2 of CAA 2001 (see section 70YI(1) of that Act).
“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 to be taken as applying all enactments applying 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).
(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,
(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 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 tax)—
(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 section 118(1) of that Act).
(1) This Chapter sets out how relief for certain expenditure incurred in relation to a qualifying oil field is given by way of reduction of a company's adjusted ring fence profits.
(2) The Chapter includes provision about—
(a) the oil fields that are qualifying oil fields (section 332B);
(b) the expenditure that is investment expenditure (section 332BA);
(c) the generation of allowance by the incurring of relievable investment expenditure in relation to a qualifying oil field (sections 332C and 332CA);
(d) restrictions on the expenditure that is relievable (sections 332D to 332DC);
(e) how allowance is activated by relevant income from the same oil field (sections 332F to 332FC and 332H to 332HB) in order to be available for reducing adjusted ring fence profits (sections 332E and 332EA);
(f) the division of an accounting period into reference periods where a company has different shares of the equity in a qualifying oil field at different times in the period (section 332G);
(g) the transfer of allowance where shares of the equity in a qualifying oil field are disposed of (sections 332I to 332IB).
(3) For provision about the conversion of field allowance under Chapter 7 (as it had effect before 1 April 2015) into allowance under this Chapter, see paragraphs 7 and 8 of Schedule 12 to FA 2015.
(1) For the purposes of this Chapter, expenditure incurred by a company is “investment” expenditure only if it is—
(a) capital expenditure, or
(b) expenditure of such other description as may be prescribed by the Treasury by regulations.
(2) Regulations under subsection (1)(b) may provide for any of the provisions of the regulations to have effect in relation to expenditure incurred before the regulations are made.
(3) But subsection (2) does not apply to any provision of amending or revoking regulations which has the effect that expenditure of any description ceases to be investment expenditure.
(4) Regulations under subsection (1)(b) may—
(a) make different provision for different purposes;
(b) make transitional provision and savings.
(1) Subsection (2) applies where a company—
(a) is a participator in a qualifying oil field, and
(b) incurs any relievable investment expenditure on or after 1 April 2015 in relation to the oil field.
(2) The company is to hold an amount of allowance equal to 62.5% of the amount of the expenditure.
Allowance held under this Chapter is called “investment allowance”.
(3) For the purposes of this section investment expenditure incurred by a company is “relievable” only if, and so far as, it is incurred for the purposes of oil-related activities (see section 274).
(4) Subsections (1) to (3) are subject to—
(a) section 332D (which prevents expenditure on the acquisition of an asset from being relievable in certain circumstances),
(b) section 332DA (which restricts relievable expenditure in relation to an oil field that previously qualified for a field allowance under Chapter 7 as a new oil field),
(c) section 332DB (which restricts relievable expenditure in relation to a project by reference to which an oil field previously qualified for a field allowance under Chapter 7 as an additionally-developed oil field), and
(d) section 332DC (which prevents certain expenditure from being relievable if it relates to an oil field in respect of which onshore allowance may be obtained under Chapter 8).
(5) Investment allowance is said in this Chapter to be “generated” at the time when the investment expenditure is incurred (see section 332K) and is referred to as being generated—
(a) “by” the company concerned;
(b) “in” the qualifying oil field concerned.
(6) Where—
(a) investment expenditure is incurred only partly for the purposes of oil-related activities, or
(b) the oil-related activities for the purposes of which investment expenditure is incurred are carried on only partly in relation to a particular qualifying oil field,
the expenditure is to be attributed to the activities or field concerned on a just and reasonable basis.
332CA Expenditure incurred before field is determined
(1) This section applies to expenditure incurred by a company on or after 1 April 2015 for the purposes of oil-related activities if or to the extent that the following conditions are met.
(2) The conditions are—
(a) that the expenditure was in respect of an area,
(b) that, at the time the expenditure was incurred, the area had not been determined under Schedule 1 to OTA 1975 to be an oil field,
(c) that the area is subsequently determined under that Schedule to be an oil field, and
(d) that the company is a licensee in the oil field.
(3) Where this section applies in relation to an amount of expenditure, that amount is treated for the purposes of this Chapter as incurred by the company—
(a) in relation to the oil field, and
(b) at the time when the area is determined under Schedule 1 to OTA 1975 to be an oil field.
332D Expenditure on acquisition of asset: disqualifying conditions
(1) Investment expenditure incurred by a company (“the acquiring company”) on the acquisition of an asset (“the acquisition concerned”) is not relievable expenditure for the purposes of section 332C if either of the disqualifying conditions in this section applies to the asset.
(2) The first disqualifying condition is that investment expenditure incurred before the acquisition concerned, by the acquiring company or another company, in acquiring, leasing, bringing into existence or enhancing the value of the asset was relievable under section 332C.
(3) The second disqualifying condition is that—
(a) the asset—
(i) is the whole or part of the equity in a qualifying oil field, or
(ii) is acquired in connection with a transfer to the acquiring company of the whole or part of the equity in a qualifying oil field,
(b) expenditure was incurred before the acquisition concerned, by the acquiring company or another company, in acquiring, leasing, bringing into existence or enhancing the value of the asset, and
(c) any of that expenditure—
(i) related to the qualifying oil field, and
(ii) would have been relievable under section 332C if this Chapter had been fully in force and had applied to expenditure incurred at that time.
(4) For the purposes of subsection (3)(a)(ii) it does not matter whether the asset is acquired at the time of the transfer.
(5) In subsection (3)(c) “this Chapter” means the provisions of this Chapter, and of any regulations made under this Chapter, as those provisions have effect at the time when the investment expenditure mentioned in subsection (1) is incurred.
(6) Subsections (7) and (8) apply where investment expenditure mentioned in subsection (1) would, in the absence of this section, be relievable under section 332C by reason of section 332CA (treatment of expenditure incurred before field is determined).
(7) Where this subsection applies—
(a) subsection (2) is to be read as if after “was” there were inserted “ , or has become, ”, and
(b) in determining for the purposes of subsection (2) or (3)(b) whether particular expenditure was incurred “before” the acquisition concerned—
(i) paragraph (b) of section 332CA(3) is to be ignored, and
(ii) accordingly, that expenditure is to be taken (for the purposes of determining whether it was incurred before the acquisition concerned) to have been incurred when it was actually incurred.
(8) Where this subsection applies, in determining whether the second disqualifying condition applies to the asset—
(a) the reference in subsection (3)(a)(i) to a qualifying oil field is to be read as including an area which, at the time of the acquisition concerned, had not been determined to be an oil field but which has subsequently become a qualifying oil field,
(b) the reference in subsection (3)(a)(ii) to a qualifying oil field is to be read as including an area which, at the time of the transfer, had not been determined to be an oil field but which has subsequently become a qualifying oil field,
(c) the reference in subsection (3)(c)(i) to “the qualifying oil field” is to be read accordingly, and
(d) the following sub-paragraph is to be treated as substituted for subsection (3)(c)(ii)—
(ii) would have been relievable under section 332C if this Chapter had been fully in force and had applied to expenditure incurred at the time when that expenditure was actually incurred and the area in question had been a qualifying oil field at that time.
(9) In subsection (8)(a) and (b) “determined” means determined under Schedule 1 to OTA 1975.
(10) In this section any reference to expenditure which was incurred by a company in “leasing” an asset is to expenditure incurred by the company under an agreement under which the asset was leased to the company.