Part 1: Relocation of section 38 of, and Schedule 15 to, FA 1973
Overview
1264.This Part inserts sections 77B to 77K inclusive of TMA as Part 7A of that Act. The inserted sections rewrite provisions in section 38 of, and Schedule 15 to, FA 1973, which provide an information power and a power to assess a licensee in respect of activities carried on by non-UK resident sub-contractors on the UK continental shelf.
1265.A licensee is a person or company who has been granted a licence by the United Kingdom government to search for and exploit the oil reserves in Great Britain, under the United Kingdom territorial sea and on the United Kingdom continental shelf. An oil field may have more than one licensee. The licensees will in turn use the services of other businesses to assist in the development and exploitation of the oil reserves but those other businesses will not themselves be licensees.
1266.Where any of those other businesses is not resident in the United Kingdom, these provisions give HMRC the power to seek information from the licensee about payments made to those businesses, and to seek payment of tax due from those other businesses that is unpaid after 30 days.
Section 77B of TMA: Pre-conditions for serving secondary-liability notice
1267.This section sets out the conditions that must exist before HMRC can seek tax from a licensee that should have been paid by a person not resident in the United Kingdom. It is based on paragraphs 4(1) and 5 of Schedule 15 to FA 1973 and paragraph 5(1) of Schedule 2 to CTA 2009.
1268.Paragraph 5 of Schedule 4 to the Petroleum Act 1998 updated the reference to the Petroleum (Production) Act 1934 in paragraph 4(1) of Schedule 15 to FA 1973.
Section 77C of TMA: Secondary-liability notices
1269.This section sets out how a notice must be served on the licensee and how the amount due is to be calculated. It is based on paragraphs 4, 4A, 7A and 8A of Schedule 15 to FA 1973 and section 86(3) of F(No 2)A 1987.
1270.Subsection (2) sets out the basic calculation, but this may be modified in cases where an exemption certificate has been issued – see sections 77F and 77G of TMA, inserted by this Schedule.
1271.The source legislation refers to interest under section 86 of TMA. Interest under section 87A of TMA was added by section 86(3)(b) of F(No 2)A 1987.
1272.Certain cases involving contracts made before 23 March 1973 are excluded – see section 77E of TMA.
1273.References to the Board have been changed to references to an officer of Revenue and Customs in line with practice. See Change 2 in Annex 1.
Section 77D of TMA: Payments under secondary-liability notices
1274.This section specifies that the tax that a licensee may be required to pay under these rules is subject to all the same provisions as if it were tax due and payable by them. It is based on paragraph 4(2) and (3) of Schedule 15 to FA 1973.
1275.Subsection (2) permits the licensee to recover any amounts paid from the person whose tax was unpaid. Subsection (3) prohibits a deduction in computing profits for any tax paid by the licensee under these provisions.
Section 77E of TMA: Exception for certain pre-1974 cases
1276.This section sets out an exception in respect of contracts made before 23 March 1973, subject to certain conditions. It is based on paragraph 6 of Schedule 15 to FA 1973.
Section 77F of TMA: Issue, cancellation and effect of exemption certificates
1277.This section sets out the circumstances under which HMRC can issue an exemption certificate to a licensee in respect of a named non-UK resident person. It is based on paragraphs 7, 8 and 8A of Schedule 15 to FA 1973.
1278.While the certificate is in force, the licensee is relieved of any liability in respect of tax unpaid by the named person.
1279.References to the Board have been changed to an officer of Revenue and Customs in line with practice. See Change 2 in Annex 1.
Section 77G of TMA: Liabilities for assessments made after exemption certificate cancelled
1280.This section determines how the liability of the licensee is calculated where a certificate issued under section 77F has been in force and then cancelled. It is based on paragraphs 4(1), 5, 7, 7A and 8A of Schedule 15 to FA 1973, section 86(3) of F(No 2)A 1987 and paragraph 5(1) of Schedule 2 to CTA 2009.
1281.The essence of the calculation is that where tax is due for a period which is partly covered by an exemption certificate under section 77F, the tax is apportioned between the period when the certificate was in force and the period after it was revoked in proportion to the profits, gains and chargeable gains of the respective periods.
Section 77H of TMA: Calculations under sections 77C(3) and 77G(7)
1282.This section sets out further rules to cover situations where apportionments are required in calculating the tax due from the licensee. It is based on paragraph 8A of Schedule 15 to FA 1973.
1283.The reference to the Board has been changed to an officer of Revenue and Customs in line with practice. See Change 2 in Annex 1.
Section 77I of TMA: Information
1284.This section sets out the power under which HMRC may seek information from a licensee in respect of transactions with and payments made to a non-UK resident person. It is based on paragraph 2 of Schedule 15 to FA 1973.
1285.The reference to “an inspector” has been revised to an officer of Revenue and Customs in line with changes made by CRCA.
Section 77J of TMA: Meaning of “related to a licence” as respects tax, or profits or gains
1286.This section provides a number of definitions that are necessary for these provisions. It is based on section 38(2) of, and paragraph 4(1) of Schedule 15 to, FA 1973.
Section 77K of TMA: Other definitions in Part 7A
1287.This section provides further interpretation. It is new.