Supplementary Charge (SC) applies to ring fence profits accruing from 17 April 2002. The current rate of SC is 10% which has been reduced from 20% with effect from 1 January 2016.
The rate of SC has undergone a number of changes over the years reflecting the oil and gas economic climate at the time. The rate was originally 10% in 2002, was increased to 20% in 2006, and to 32% in respect of profits accruing after 23 March 2011, until the rate was reduced back to the pre-2011 level of 20% for accounting periods beginning on or after 1 January 2015. The rate was further reduced to 10% for accounting periods beginning on or after 1 January 2016. Relief for decommissioning expenditure for work undertaken after 21 March 2012 was however limited to 20% in the periods when the rate exceeded the 20% threshold. This is achieved by grossing up the profits otherwise subject to SC by a fraction of the amount by which the profits have been reduced by decommissioning costs.
The tax base of profits subject to SC is the ring fence profits of the company chargeable to Corporation Tax after removing financing costs and deducting any Field, Cluster, or Investment allowances available.
The profits of the company subject to SC can be reduced by Field, Cluster and Investment Allowances once the relevant allowance has been activated. Until 1 April 2015, there had been eight different Field Allowances; however, Finance Act 2015 introduced a unified Investment Allowance which has replaced the majority of other Field Allowances. Details of these allowances can be found under Field and Investment Allowances.
SC is payable in instalments together with Corporation Tax.
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