Debt cap: particular types of company: oil extraction activities
This guidance applies to worldwide group periods of account ending before or straddling 1 April 2017.
Ring fence trades
Where a company carries on oil extraction activities, or the acquisition or exploitation of oil rights, these activities are treated by CTA10/S274 and S279 as a separate trade, distinct from any other trade or business carried on by the company. This trade is ring-fenced, and losses from oil extraction activities can only be allowed against profits generated inside the ring-fence.
Where a company carries on such a ring fence trade, and financing expenses or income are brought into account in calculating the profits of that trade, such amounts are excluded by TIOPA10/S318 from being financing expense amounts or financing income amounts of the company for debt cap purposes.
There is a corresponding exclusion when calculating the available amount - see CFM92400.