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HMRC internal manual

Oil Taxation Manual

Transferable tax history - Supplementary Charge - Calculation of the SC repayment

The calculation of the SC repayment is a mechanical process and follows on from what happens when an RFCT loss is carried back to a TTH accounting period. Where a loss is carried back to a pre-transaction accounting period, and is set off against activated TTH, the ARFP that are chargeable are reduced by the appropriate amount and a repayment is made accordingly.

This is most easily illustrated with examples:

Example: carry back against activated TTH

Decommissioning expenses       20,000,000

Tracked Profits                                  15,000,000

TTH activated                                     5,000,000


Unrelieved decom loss                  5,000,000 (including finance costs of 2,000,000)


Transferred TTH

RFCT profits                                        5,000,000 @ 30%

Taxable ARFP                                     6,000,000 @ 10%


  • The loss of £5,000,000 is set off against the activated RFCT TTH of £5,000,000

  • As a result paragraph 26 requires a recalculation of the transferred adjusted ring fence profits amount in line with paragraph 50

  • The SC repayment is based on the recalculated transferred ARFP amount which is the aggregate of:

                - the reduced ARFP amount (paragraph 51)

                - the adjusted finance cost amount for the loss period (paragraph 55)

  • For most pre-transaction accounting periods, the reduced ARFP is the activated ARFP amount less the loss used against activated TTH for that pre-transaction accounting period. However, there are separate rules for calculating the reduced ARFP amount for pre-transaction accounting periods where the SC rate was over 32% (see OTXXXXX).

  • The activated ARFP amount here is based on the calculation (A/T) x ARFP where

A is the amount of the decommissioning loss applied against activated TTH for the period (here £5m)

T is the unused transferred profits amount (here £5m)

ARFP is the amount of transferred ARFP (here £6m)

(5,000,000/5,000,000) x 6,000,000 = 6,000,000

The reduced ARFP figure is therefore 6,000,000 less £5,000,000 decommissioning loss set against activated TTH, which gives reduced ARFP of £1,000,000

  • The adjusted finance cost amount is equal to (A/L) x FC where

                A is the amount of loss applied for the period (here £5m)

                L is the total amount of the decommissioning loss (here £5m)

FC is the lower of the amount of the finance costs included in the loss (here £2m) and the amount of the loss for the period (here £5m) so in this example the FC amount is £2,000,000

              (5,000,000/5,000,000) x 2,000,000 = 2,000,000

The recalculated transferred ARFP is therefore £1,000,000 + £2,000,000 = £3,000,000 against an original transferred ARFP of £6,000,000 resulting in a repayment of £300,000 which is 10% of £3,000,000, the rate at which the seller paid supplementary charge on those profits.