What is the ring fence expenditure supplement under Corporation Tax Act 2010 section 307?

The ring fence expenditure supplement allows companies carrying on a ring fence trade — broadly UK and UK continental shelf oil and gas extraction — to claim a financial supplement in respect of qualifying pre-commencement expenditure, trading losses incurred once trading begins, and some or all of any supplement allowed for earlier accounting periods.

How many accounting periods can a company claim the ring fence expenditure supplement?

A company may claim the ring fence expenditure supplement for a maximum of 10 accounting periods. Once that cap is reached, no further supplement may be claimed. This limit applies regardless of whether the supplement relates to pre-commencement expenditure, post-commencement trading losses or previously allowed supplements.

What is the difference between pre-commencement and post-commencement rules for the supplement?

Pre-commencement rules cover the supplement available for costs incurred while preparing to carry on a ring fence trade but before trading actually begins, such as exploration and appraisal costs. Post-commencement rules apply to the supplement available for losses that arise once the ring fence trade is up and running.

What reductions apply to the ring fence expenditure supplement?

The supplement must be reduced by disposal receipts on pre-commencement assets, ring fence losses available for relief against earlier ring fence profits, carried-forward ring fence loss relief already given, and unrelieved group ring fence profits — that is, ring fence profits elsewhere in the corporate group not sheltered by losses.

Corporation Tax Act 2010 section 307

Overview of Chapter

Section 307 provides an overview of the ring fence expenditure supplement, which allows companies carrying on a ring fence trade (broadly, UK oil and gas extraction) to claim a supplement in respect of pre-commencement expenditure, trading losses and previously allowed supplements.

Companies carrying on a ring fence trade may claim a supplement for qualifying pre-commencement expenditure, trading losses and some or all of the supplement allowed in earlier periods
A company may claim the supplement for a maximum of 10 accounting periods
Separate rules apply to expenditure incurred before the trade begins (pre-commencement) and to losses incurred once the trade is up and running (post-commencement)
The supplement is reduced for disposal receipts on pre-commencement assets, ring fence losses available for relief against earlier profits, carried-forward ring fence loss relief and unrelieved group ring fence profits

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