SolvedOT21800 | Energy Profits Levy: Example of calculating levy profits and loss
From HM Revenue & Customs · Oil Taxation Manual
Company X makes £500m ring fence profits in a qualifying AP.
It makes a £20m payment relating to a bond payment. Company X must add back this £20m financing cost to its ring fence profits.
Company X spends £50m on decommissioning an old pipeline for which it has claimed a 100% special allowance under CAA01\S164. Company X will have to add back this £50m decommissioning cost to its ring fence profits.
Company X received £10m PRT repayment from this decommissioning, this will be deducted from its ring fence profits.
Company X incurs £5 million of qualifying capital expenditure, generating £1.45m (29% of £5 million) of additional expenditure. Company X will deduct £1.45m from its ring fence profits.
Company X has a carried forward RFCT loss of £100m. However, as this loss is an RFCT loss it cannot be used to reduce the profits chargeable to the levy.
In total the profits chargeable to the levy are £500m + £20m + £50m - £10m - £1.45m = £578.55m.