Budget Resolution — Taxation of UK Oil and Gas Production — 29 Mar 2011 at 21:59

The majority of MPs voted to increase the extra tax on profits from the production of oil and gas in the UK, or on the UK continental shelf, from 20% to 32%.

The tax increased was the Corporation Tax Ring Fence which is a mechanism for measuring profits from oil exploitation, separating the whole of a company's exploration and production operations from its other activities.^[1][2]

The text of the approved resolution was as follows^[3]:

• That—
• (1) In section 330 of the Corporation Tax Act 2010 (supplementary charge in respect of ring fence trades), in subsection (1), for “20%” substitute “32%”.
• (2) The amendment made by paragraph (1) has effect in relation to accounting periods beginning on or after 24 March 2011 (but see also paragraph (3)).
• (3) Paragraphs (4) to (9) apply where a company has an accounting period beginning before 24 March 2011 and ending on or after that date (“the straddling period”).
• (4) For the purpose of calculating the amount of the supplementary charge on the company for the straddling period—
• (a) so much of that period as falls before 24 March 2011, and so much of that period as falls on or after that date, are treated as separate accounting periods, and
• (b) the company’s adjusted ring fence profits for the straddling period are apportioned to the two separate accounting periods in proportion to the number of days in those periods.
• (5) The amount of the supplementary charge on the company for the straddling period is the sum of the amounts of supplementary charge that would, in accordance with paragraph (4), be chargeable on the company for those separate accounting periods.
• (6) In relation to the straddling period—
• (a) the Instalment Payments Regulations apply as if the amendment made by paragraph (1) had not been made, but
• (b) those Regulations also apply separately, in accordance with paragraph (7), in relation to the increase in the amount of any supplementary charge on the company for that period that arises as a result of that amendment.
• (7) In the separate application of those Regulations under paragraph (6)(b), those Regulations have effect as if, for the purposes of those Regulations—
• (a) the straddling period were an accounting period beginning on 24 March 2011,
• (b) supplementary charge were chargeable on the company for that period, and
• (c) the amount of that charge were equal to the increase in the amount of the supplementary charge for the straddling period that arises as a result of the amendment made by paragraph (1).
• (8) Any reference in the Instalment Payment Regulations to the total liability of a company is, accordingly, to be read—
• (a) in their application as a result of paragraph (6)(a), as a reference to the amount that would be the company’s total liability for the straddling period if the amendment made by paragraph (1) had not been made, and
• (b) in their application as a result of paragraph (6)(b), as a reference to the amount of the supplementary charge on the company for the deemed accounting period under paragraph (7)(a).
• (9) For the purposes of the Instalment Payment Regulations—
• (a) a company is to be regarded as a large company as respects the deemed accounting period under paragraph (7)(a) if (and only if) it is a large company for those purposes as respects the straddling period, and
• (b) any question whether a company is a large company as respects the straddling period is to be determined as it would have been determined if the amendment made by paragraph (1) had not been made.
• (10) In this Resolution—
• “adjusted ring fence profits” has the same meaning as in section 330 of the Corporation Tax Act 2010;
• “the Instalment Payments Regulations” means the Corporation Tax (Instalment Payments) Regulations 1998 (S.I. 1998/3175);
• “supplementary charge” means any sum chargeable under section 330(1) of the Corporation Tax Act 2010 as if it were an amount of corporation tax.
• And it is declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

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• [1] HMRC - Corporation Tax Ring Fence: Introduction to the Ring Fence
• [2] HMRC - The taxation of the UK oil industry: an overview: other developments to the fiscal regime 1975 to 2012
• [3] Official Report, House of Commons, 29 March 2011

Debate in Parliament | Source |