Ring fence profits
These are profits derived from oil extraction activities or oil rights in the UK and on the UK continental shelf. The ring fence prevents taxable profits from such activities being reduced by losses from other activities or by excessive interest payments.
Ring fence profits are taxed at 30%.
A ring fence company can claim marginal relief on profits between £300,000 and £1.5m.
Marginal relief is calculated using the ring-fence fraction, which is currently 11/400 (FA 2014 s 6).
(Upper limit – profits) x [(basic profits x fraction) / profits]
The upper limit is £1,500,000.
Basic profits are company profits (i.e., income and gains).
Profits are basic profits + franked investment income (grossed up by 100/90).