SCHEDULE 19CPetroleum extraction activities: ring fence expenditure supplement
Part 2Application and interpretation
Qualifying pre-commencement expenditure
6
(1)
For the purposes of this Schedule, expenditure is “qualifying pre-commencement expenditure” if it meets conditions A to D.
(2)
Condition A is that the expenditure is incurred on or after 1st January 2006.
(3)
Condition B is that the expenditure is incurred in the course of oil extraction activities.
(4)
Condition C is that the expenditure is incurred by a person with a view to carrying on a ring fence trade but before the person sets up and commences the ring fence trade.
(5)
Condition D is that the expenditure—
(a)
is subsequently allowable as a deduction in calculating the profits of the ring fence trade for the commencement period (whether or not any part of it is so allowable for any post-commencement period), or
(b)
is relevant R&D expenditure incurred by an SME.
(6)
For the purposes of this paragraph, expenditure incurred by a company is “relevant R&D expenditure incurred by an SME” if—
(a)
the company makes an election under paragraph 14 of Schedule 20 to the Finance Act 2000 (R&D tax relief for SMEs: alternative treatment of pre-trading expenditure) in respect of that expenditure, but
(b)
the company does not make a claim for an R&D tax credit under that Schedule in respect of that expenditure.
(7)
In the case of any qualifying pre-commencement expenditure which is relevant R&D expenditure incurred by an SME, the amount of that expenditure is treated for the purposes of this Schedule as being equal to 150% of its actual amount.
(8)
In the case of any qualifying pre-commencement expenditure which is relevant R&D expenditure incurred by a large company, the amount of that expenditure is treated for the purposes of this Schedule as being equal to 125% of its actual amount.
(9)
For this purpose “relevant R&D expenditure incurred by a large company” means qualifying expenditure within the meaning given by paragraph 11(3) of Schedule 12 to the Finance Act 2002 (R&D tax relief for large companies).