PRT: Safeguard - Example
|Accumulated Capital Expenditure or Safeguard Capital Base (SCB)||500|
|PRT before safeguard (A)||25|
|Compute adjusted profit|
|plus Qualifying expenditure||20|
|15% of Safeguard Capital Base (SCB)||75|
|Excess of adjusted profit over 15% SCB||15|
|80% of excess (B)||12|
|PRT charge (lower of A or B)||12|
|Safeguard reduction (A - B) (25 - 12)||13|
- If supplement is not claimed, the assessable and the adjusted profit will both be 70 (ie 63 plus 7). The SCB in this case will be 480 (ie 500 minus 20) and, as 15% of this (72) is greater than the adjusted profit figure (70), the PRT is reduced to nil, i.e. the safeguard reduction is 28.5. See OT17700 on the interaction of safeguard and supplement.
- As the above computation shows, not all the expenditure claimed is tax-effective. Some companies have therefore deferred making expenditure claims during safeguard, but see OT17750 on legislation which counters such deferral.