OT68020 | Transferable tax history - Onward sales - Original TTH amount treated as eligible ring fence profits

The treatment described below applies where there is an onward sale of a TTH interest, and the original purchaser make an election to transfer TTH.

In such a case, the unused transferred profits amount for each pre-acquisition accounting period related to the first election for which there is such an amount is treated as if it were part of the eligible ring fence profits of the first purchaser for that accounting period. The unused transferred profits amount for an accounting period is any amount that was transferred under the original TTH election against which losses have not already been set in accordance with FA19\Sch15\Para25.

However, if the licence interest subject to the onward transfer is not the same as the licence interest that was transferred with the original election, then only the relevant proportion of the unused transferred profits amount for each period is to be so treated.

Example

Company A acquired a 20% interest in field X, with £20m TTH, £12m relating to AP1 and £8m related to AP2.

Company A sold 15% to company B. A and B make a TTH election on that onward sale. No losses have been set against the original TTH amounts. Because only ¾ of the originally acquired licence interest is being transferred only that proportion of the unused transferred profits amounts for the pre-acquisition APs can be treated as eligible ring fence profits. Therefore, only £9m in AP1 and £6m in AP2 are so treated.

Where an unused transferred profit amount from the previous TTH election is treated as part of the eligible ring fence profits of the original seller, those amounts may consequently be included within the new TTH election as part of the total TTH amount.