How does section 12 of the Energy (Oil and Gas) Profits Levy Act 2022 affect levy group relief?

Section 12 provides that where arrangements exist to transfer a company out of a group, that company is treated as not being a group member for levy purposes. This prevents it from surrendering its Energy Profits Levy losses to other group members or receiving surrendered losses from them during the period when transfer arrangements are in place.

What corporation tax provisions does section 12 of the Energy (Oil and Gas) Profits Levy Act 2022 mirror?

Section 12 imports the existing corporation tax anti-avoidance rules from sections 154 and 155A to 156 of the Corporation Tax Act 2010 into the Energy Profits Levy regime. These rules prevent manipulation of group structures by treating companies subject to transfer arrangements as outside the group for relief purposes.

Are any arrangements excluded from the anti-avoidance rules in section 12?

Yes, certain commercial arrangements are excluded. Mortgage-type security arrangements and qualifying institutional investor arrangements are not treated as transfer arrangements. A company whose shares are merely subject to such arrangements retains its entitlement to levy group relief and can continue to surrender or receive levy losses.

What is the purpose of denying levy group relief under section 12 transfer arrangement rules?

The purpose is to stop groups from engineering a temporary group relationship purely to gain a tax advantage by moving Energy Profits Levy losses between companies that are not genuinely part of the same economic group on a lasting basis, ensuring levy group relief reflects genuine ongoing economic relationships.

Energy (Oil and Gas) Profits Levy Act 2022 section 12

Arrangements for transfer of companies

Section 12 deals with how arrangements to transfer a company out of a group affect the ability to surrender or claim Energy Profits Levy losses between group companies.

Where arrangements exist to transfer a company out of a group, that company may be treated as not being a member of the group for levy purposes.
This prevents companies from claiming group relief for the levy when one of the companies involved is about to leave the group under a transfer arrangement.
The rules mirror the existing corporation tax group relief anti-avoidance provisions found in sections 154 and 155A to 156 of the Corporation Tax Act 2010.
Certain commercial arrangements, such as mortgage-type arrangements and qualifying institutional investor arrangements, are excluded from these anti-avoidance provisions, so they will not trigger a denial of levy group relief.

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