Interest: how interest is calculated: supplementary tax on north sea oil companies
A supplementary tax in respect of North Sea (UK Continental Shelf) oil ring fence trades was introduced on the 17 April 2002.
Accounting periods straddling 17 April 2002
There were special rules for paying this tax during the introductory period where the accounting period of the company straddles the start date of 17 April 2002 and the ‘quarterly instalment payment’ (QIP) signal is set to ‘Y’ for that accounting period.
These special rules affected the quarterly instalment due dates (Word 42KB). As well as the normal quarterly instalment due dates there were up to an additional four further instalments. These instalments were worked out from the 17 April 2002 to the end of the accounting period using the normal rules for calculating instalments. See COM95000 on how to work out quarterly instalments amounts and due dates.
This special rule only applied to accounting periods straddling 17 April 2002, future years have no special arrangements; the normal rules for quarterly instalment payments apply.
Accounting periods starting on or after 17 April 2002
It is important to ensure the correct information is entered in the ‘tax calculation’ area in function RAMA (Record / Amend Assessment). You must ensure that any change to the ‘RF profits included’ in the ‘Deductions/reliefs’ section is matched by a change to the ‘RF CT included’ in the ‘Tax calculation’ section.
Credit interest and debit interest are chargeable on this supplementary tax from the new instalment due dates. Credit or debit interest is still chargeable on the original tax charge using the normal quarterly instalment due dates.
Any credit or debit interest charges raised on the supplementary tax is not shown separately to the credit or debit interest raised on the rest of the tax charge in function VPPD (View Payments and Postings Details). There is one posting for credit interest and one posting for debit interest.
The credit or debit interest charge can be viewed in function DINT (Display Interest Computation). You can view all the instalment due dates and amounts due for the supplementary and original tax charge. You can also view the full interest accrual details for each separate instalment.
Any credit or debit interest charges that are due are calculated when:
- the normal due date (Word 49KB) has passed and
- a tax charge has been recorded on the AP.
COTAX is capable of automatically calculating and raising credit or debit interest charges in the majority of these cases. Where it cannot raise the charge automatically, it makes an entry on CDIW (Credit Debit Interest Worklist) and the charge can be raised manually using function RMIC (Raise Manual Interest Charge).