OT21040 | Corporation Tax Ring Fence: Tariff Receipts and Tax-Exempt Tariffing Receipts

CTA10\S291\S291A\S291B

Tariff receipts (including tax-exempt tariffing receipts) which would not otherwise be within the ring fence are brought within the ring fence as oil extraction activities by CTA10\S291, 291A and 291B for RFCT and SC purposes. This guidance has been updated following the clarification relating to tariff receipts provided in Finance Act 2018\S22 and the legislation takes effect from 1 January 2018. A technical note providing further background information can be found here. Tariff receipts and tax-exempt tariffing receipts for PRT purposes are defined in OTA83\S6&8 (further guidance relating to this can be found in the Oil Taxation Manual (OT15000)).

Additional notes:

1. Where a participator receives income for allowing a third party to use its oil and gas asset (such as a pipeline) that is or has been used in a ring fence trade, that income will be taxed within the ring fence tax regime. This is to ensure that assets that have been used for oil extraction activities are taxed appropriately within the ring fence tax regime. ‘Participator’ is defined in OTA75\S12(1).

2. Tariff receipts are amounts received in consideration for the use of a ring fence asset or for the provision of services or other business facilities in connection with the use of a ring-fence asset. (CTA10\S291\S291A). Certain amounts are specifically excluded from being tariff receipts. These include interest payments, deballasting payments and payments for “other use” of the asset.Where a payment is partly for one of these excluded purposes it must be apportioned on a just and reasonable manner to determine the amount that is a tariff receipt. (CTA10\S291A(4) and (5)).

3. Income from leasing activity is not tariff receipts. Leasing activities are not oil related activities and do not meet the “use of an asset for an oil purpose” test (CTA10\S291A(6)). Receipts from leasing activities are therefore for “other use” of the asset and do not fall within the definition of tariff receipts.

4. Where an arrangement has been entered into with the main purpose, or one of the main purposes, of obtaining a tax advantage, just and reasonable adjustments are to be made. (CTA10\S291B).

5. Where the activities of participator or a company connected with the participator gives rise to tariff receipts of the participator, the activities are treated as oil extraction activities. (CTA10\S291(6)).

6. Where a company is connected with a participator and receives tariff receipts, which are attributable to the participator, that company is treated as a participator for the purposes of Condition A. (CTA10\S291(7)).

7. Where tariff receipts or tax-exempt tariffing receipts are received by a participator in a foreign (e.g. Norwegian) field for UK use of a field asset, these are brought within the ring fence by OTA83\Sch4\Para16.