Section 48: Reduction in Rate of Supplementary Charge
Summary
1.This section reduces the rate of Supplementary Charge from 32% to 20% of companies’ ring fence profits. The reduced rate will have effect for accounting periods beginning on or after 1 January 2015. For accounting periods straddling this date, the rate will apply to profits apportioned to the part of the accounting period running from1 January 2015.
Details of the Section
2.Subsection (1) reduces the rate of Supplementary Charge from 32% to 20%.
3.Subsection (2) provides that the reduced rate applies to accounting periods beginning on or after 1 January 2015.
4.Subsection (3) makes further provisions where a company has an accounting period beginning before 1 January 2015 and ending on or after that date.
5.Subsection (4) provides that if an accounting period straddles 1 January 2015, this is to be treated as two separate accounting periods: one falling before 1 January 2015 and one falling on and after that date. Profits for the original accounting period are time-apportioned between the two periods in relation to the number of days in each.
6.Subsection (5) provides that when an accounting period is apportioned as described in subsection (4), sections 330A and 330B of Corporation Taxes Act 2010 only apply in relation to the period falling before 1 January 2015.
7.Subsection (6) provides that the amount of Supplementary Charge for a straddling period is equal to the sum of the separate amounts of Supplementary Charge for each of the separate periods mentioned in subsection (4).
Background Note
8.Supplementary Charge applies to companies producing oil and gas in the UK or on the UK Continental Shelf. Special tax rules apply to such companies. A ‘ring fence’ is placed around their profits which are treated as a separate trade from the companies’ wider activities. This means that the ring fenced profits cannot be reduced by losses from other activities carried on by the company or from losses arising to other companies in the same group.
9.Supplementary Charge is applied to adjusted ring fence profits. These are defined as the amount of profit (or loss) arising from any ring fence trade but excluding any financing costs.
10.Supplementary Charge was introduced in 2002 at a rate of 10%. This was increased to 20% for accounting periods beginning on or after 1 January 2006 and to 32% for accounting periods beginning on or after 24 March 2011. This reduction will help provide the right conditions for business investment to maximise the economic recovery of the UK’s oil and gas resources.
