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HMRC internal manual

Oil Taxation Manual

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HM Revenue & Customs
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Corporation tax ring fence: onshore allowance - changes in equity share and the activation of allowance

CTA2010\S356G, S356GA -S356GD

The above sections apply the principles of S356E activation of allowance, S356EA closing balance of allowance and S356EB carrying forward of unactivated allowance (OT21525) where there has been a change in the equity share of a licensed area containing, in whole or in part, a site.

Where there has been a change (or changes) in equity interest in a particular accounting period then that accounting period is divided into reference periods. A reference period is a period of consecutive days that meets the following conditions—

  1. at the beginning of each day in the period, the company is a licensee in the licensed area;
  2. at the beginning of each day in the period, the company’s share of the equity in the licensed area is the same;
  3. each day in the period falls within the accounting period.

The effect is to treat each reference period as an accounting period with an unchanged equity interest. The main difference is that, for the purposes of activating the allowance, a company’s relevant income from the site in the reference period is (see CTA2010\S356E(3) for accounting periods):

I x R/L  

where

I is the company’s relevant income from the site in the whole of the accounting period;

R is the number of days in the reference period;

L is the number of days in the accounting period for which the company is a licensee in the licensed area concerned.