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HMRC internal manual

Oil Taxation Manual

Oil contractors ring fence: the excess above the hire cap

Where, as a result of the operation of the hire cap, there is an excess amount which is not allowable as a deduction within the contractors ring fence, this amount may be treated in two ways:

  1. it can be set against profits outside the contractor ring fence. This treatment follows from the separation of the activities into two trades (CTA2010\356NA(3)(a))
  2. any amount in excess of the profits arising outside the contractor ring fence can be surrendered as group relief. As the excess arises from trading activities (albeit from outside the contractors ring fence and therefore without attendant income) they are trading losses and are so treated on surrender (CTA2010\356NA(3)(b)).

Any excess not used in the year can be carried forward and used against non ring fence income (contractor or production) OT50050.