Corporation Tax Act 2010 section 356NB

Restriction on debits to be brought into account

Section 356NB restricts the ability of oil contractors to use loan relationship debits (such as interest costs and financing expenses) to reduce their ring fence profits, while providing specific exceptions where the borrowing directly finances oil contractor activities.

• Loan relationship debits cannot generally be set against a contractor's ring fence profits, protecting those profits from being reduced by financing costs unrelated to oil contractor activities.
• The restriction does not apply where money has been borrowed specifically to fund oil contractor activities, or has been earmarked for such expenditure, including abortive financing costs for loans that were intended for that purpose.
• For non-lending relationships (such as those involving foreign exchange), the restriction is also lifted where interest payments constitute oil contractor expenditure, or where exchange losses relate to debts whose interest would qualify as such expenditure.
• Any debit that is blocked from reducing ring fence profits is reclassified as a non-trading debit, ensuring the contractor can still obtain relief for it against other, non-ring-fence profits.