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HMRC internal manual

Oil Taxation Manual

Capital allowances: extended ring fence expenditure supplement for onshore activities - pre-commencement additional supplement

CTA2010\S329I Before it starts to trade a company may acquire a licence interest and carry out oil exploration and appraisal activities in relation to that interest. Where a qualifying company (OT26203) incurs qualifying pre-commencement onshore expenditure (OT26230) on or after 5 December 2013, but before it sets up and commence a ring fence trade, it can claim ERFES under the rules for pre-commencement additional supplement.

Pre-commencement ERFES is calculated at the relevant percentage (OT26205) of the reference amount for each pre-commencement period. The reference amount is the amount in the ERFES mixed pool (OT26235) for the accounting period before ERFES for the period is added, CTA2010\S329M. If the accounting period is less than 12 months long, the amount of ERFES is reduced proportionately.

Making claims

Claims for pre-commencement ERFES are made as a claim in the accounting period in which the ring fence trade begins, the commencement period. Effect is given to the claim by treating the amount of pre-commencement ERFES as expenditure incurred by the company in the commencement period which is allowable as a deduction in computing ring fence profits of that period.

The time limits for making the claim in the commencement period are the same limits as apply for making group relief claims (as set out in FA98\Sch18\para74), normally 12 months after the filing date for the claimant company’s return.