Taxes Management Act 1970 section 77G

Liabilities for assessments made after exemption certificate cancelled

Section 77G determines how much a petroleum licence holder can be required to pay under a secondary-liability notice when a tax assessment is made after an exemption certificate has been cancelled, and the assessed profits or gains span both the period when the certificate was in force and periods when it was not.

• After an exemption certificate is cancelled, if tax related to the licence is assessed on the certificate applicant under UK continental shelf provisions (but not employment income tax under ITEPA 2003), the licence holder may face a secondary liability
• The section applies where the assessed profits or chargeable gains include amounts arising both while the certificate was in force and while it was not in force
• The licence holder's liability is reduced to exclude the portion of profits or gains that arose while the exemption certificate was in force, using the formula A × (1 − CIF ÷ (CIF + NIF)), plus a corresponding proportion of any interest on unpaid tax
• The formula effectively means the licence holder is only liable for the share of the tax that relates to profits or gains accruing during periods when the certificate was not in force