Part 8Oil activities
Chapter 5Ring fence expenditure supplement
Application and interpretation
312Qualifying pre-commencement expenditure
1
For the purposes of this Chapter, expenditure is “qualifying pre-commencement expenditure” if it meets each of conditions A to D.
2
Condition A is that the expenditure is incurred on or after 1 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 company with a view to carrying on a ring fence trade but before the company 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 section, expenditure incurred by a company is “relevant R&D expenditure incurred by an SME” if—
a
the company makes an election under section 1045 of CTA 2009 (alternative treatment for pre-trading expenditure: deemed trading loss) in respect of that expenditure, but
b
the company does not make a claim for an R&D tax credit under section 1054 of that Act 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 Chapter 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 Chapter as being equal to 125% of its actual amount.
9
In subsection (8) “relevant R&D expenditure incurred by a large company” means qualifying Chapter 5 expenditure, as defined in section 1076 of CTA 2009.