Taxes Consolidation Act 1997 section 685

Separation of trading activities

Section 685 requires petroleum activities and qualifying mining activities carried on as part of a wider trade to be treated as separate trades for tax purposes, with receipts and expenses apportioned accordingly.

• Where petroleum activities form part of a larger trade, they must be treated as a separate trade distinct from all other activities, for the purposes of both the Tax Acts and the Capital Gains Tax Acts.
• Receipts and expenses must be apportioned between the petroleum trade and the remainder of the larger trade, so that the net income from the petroleum activities can be correctly calculated.
• This ring-fencing ensures that loss relief under section 687 and group relief under section 688 are confined to the separate petroleum trade.
• Where a person works a qualifying mine as part of a wider trade, that mining activity is similarly treated as a separate trade for the purposes of this Chapter, with a corresponding apportionment of receipts and expenses.