Overview
695.This Schedule contains provisions relating to the income tax charge on profits from oil extraction and related activities. It rewrites Chapter 5 of Part 12 of ICTA and sections 62 to 65 of FA 1991 by inserting the rules for income tax into ITTOIA after section 225 of that Act.
696.The provisions are inserted at this point because they are, in essence, variations of the general rules relating to trading income in Part 2 of ITTOIA. The starting point is that all normal trading income rules apply unless they are modified by a provision of this Chapter.
697.Some parts of the source legislation apply only for corporation tax – for example, the ring fence expenditure supplement - and are therefore not reproduced for income tax. There is, therefore, no income tax equivalent of the following sections of CTA 2010: 271, 276, 280, 286 to 288, 299 to 301 and 303 to 357. Section 492(2) of ICTA (restriction of relief for trading losses) was rewritten for income tax purposes in section 80 of ITA , and section 16 of ITTOIA is the income tax equivalent of sections 274 and 279 of CTA 2010.
698.A number of PRT definitions are used in the income tax rules, and some parts of the legislation depend on calculations made for PRT purposes. In particular the legislation uses the PRT term “participator” (see section 12(1) of OTA 1975). The legislation for PRT is not itself being rewritten.
699.The rewritten definitions of “exploration and exploitation activities”, “exploration and exploitation rights” and “designated area” are in section 874 of ITTOIA. The extension of the United Kingdom to its territorial sea for the purposes of income tax is in section 1013 of ITA.
700.Oil is used as a shorthand throughout the commentary on these new sections, but unless specifically mentioned the same rules and considerations apply to gas and other associated products.