Details of the Schedule
Part 1
Expenditure on abandonment guarantees
2.Paragraphs 1 and 2 amend sections 225N and 225R of the Income Tax (Trading and Other Income) Act 2005 (ITTOIA) and sections 292 and 296 Corporation Tax Act 2010 (CTA) to ensure these sections also apply in respect of oil fields that are not subject to PRT.
Expenditure under abandonment guarantees
3.Paragraphs 3 and 4 provide that paragraph 8 of Schedule 3 and paragraph 2A of Schedule 5 to the Oil Taxation Act 1975 (OTA) do not apply to expenditure which is met out of a payment under an abandonment guarantee or security.
4.Paragraphs 5 to 7 omit sections and sub-sections in the Finance Act 1991 (FA), ITTOIA and CTA.
Reimbursement by defaulter in respect of abandonment expenditure
5.Paragraphs 8 to 10 omit sections in FA, ITTOIA and CTA so as to disapply, for the purposes of oil activities, the reimbursement rules.
Consequential amendments
6.Paragraphs 11 to 20 make minor consequential changes resulting from the amendments made by this Schedule.
Part 2
7.Paragraph 21 inserts section 298A into Corporation Tax Act 2010 (CTA 2010).
8.Subsection (1) of section 298A provides that the section applies if:
a company carrying on a ring fence trade (‘the defaulter’) has defaulted on a liability to pay decommissioning expenditure,
another company carrying on a ring fence trade (‘the contributing company’) pays an amount (‘the relevant contribution’) towards meeting the default, and
the relevant contribution is less than the sum of the amounts within subsection (2).
9.Subsection (2) of section 298A provides that the amounts within this subsection are:
any payments made to the contributing company by the guarantor under an abandonment guarantee,
any reimbursement payments, and
any tax relief which the contributing company obtains in respect of the relevant contribution.
10.Subsection (3) of section 298A provides that the difference between the sum of the amounts within subsection (2) and the relevant contribution (“the relevant difference”) is to be treated as a receipt of the contributing company’s ring fence trade for the relevant accounting period.
11.Subsections (4) to (6) of section 298A define “the certification date” and “the relevant accounting period”.
12.Subsection (7) of section 298A provides the basis on which the “relevant difference” is to be determined.
13.Subsection (8) of section 298A provides that where subsections (5) or (6) apply corporation tax is due and payable as if it were corporation tax for an accounting period beginning with the certification date.
14.Subsection (9) of section 298A provides that any additional assessment required to take account of a receipt under this section may be made at any time not later than 4 years after the end of the calendar year in which the certification date falls.
15.Subsection (10) of section 298A provides the meaning of certain terms used in this section.
16.Paragraph 22 inserts section 225V into Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005).
17.Section 225V replicates, for the purposes of ITTOIA 2005, the effect of new section 298A CTA 2010.
