Clause 182 - Supplementary charge

Part of Finance Bill – in a Public Bill Committee at 4:45 pm on 19 June 2012.

Alert me about debates like this

Photo of Cathy Jamieson Cathy Jamieson Shadow Minister (Treasury) 4:45, 19 June 2012

We seem to be making good progress, and I hope to continue that. I mentioned earlier that 7.45 was a key moment for many people in the Committee.  I have to say that 4 August will be a key moment for Kilmarnock football club, which has on that day drawn “club 12” in the opening home game of the season. Those who are familiar with the current disputes involving certain football clubs and taxation issues—there is an element here—will, I have no doubt, understand the meaning of “club 12”.

To return to the issues of oil and gas, clause 182 clarifies the definition of the scope of the supplementary charge set out in section 330 of the Corporation Tax Act 2010. The clause provides that that supplementary charge be charged by reference to a company’s ring-fence profits. As the Minister has indicated, the clause has effect from 6 December 2011.

The supplementary charge is chargeable on a company’s adjusted ring-fence profits as if it were an amount of corporation tax chargeable on the company. The company’s adjusted ring-fence profits for an accounting period are currently defined in section 330(2) of the Corporation Tax Act as the profits of the company’s ring-fence trade chargeable to corporation tax, on the assumption in subsection (3) that financing costs are left out of account.

It was the Government’s intention when the legislation was first introduced in 2002 that a company’s adjusted ring-fence profits should include all profits that could arise to a company carrying on a ring-fence trade from ring-fence activities. In other words, the intention was that the scope of the supplementary charge should match the scope of ring-fence corporation tax. This includes chargeable gains, which can arise on the disposal of an interest in an oil licence.

I am sure the Minister can confirm whether this is the case, but as I understand it, it remains the Government’s view that under the existing law the scope of the supplementary charge matches the scope of the ring-fence corporation tax. However, the Government are aware that some people in the industry take a different view, believing that chargeable gains fall outside the scope of the supplementary charge. For that reason, as I understand it, this technical clause clarifies the scope of the supplementary charge by ensuring that it matches that on the ring-fence corporation tax, in accordance with the Government’s intention when the legislation was first enacted in 2002.