Taxes Consolidation Act 1997 section 686

Reduction of corporation tax

Section 686 provided for a reduced 25% effective rate of corporation tax on certain petroleum profits derived under relevant petroleum leases, as an incentive to encourage exploration and production before specified cut-off dates.

• Corporation tax on qualifying petroleum income was reduced to an effective rate of 25% using a formula that adjusted the standard rate downward, with the rate time-apportioned where an accounting period straddled two financial years with different rates.
• A relevant petroleum lease was one granted for a field discovered under specified licensing terms, with the cut-off date for the lease grant depending on the original licence period: before 1 June 2003 for periods up to 10 years, before 1 June 2007 for periods of 10 to 15 years, and before 1 June 2013 for periods longer than 15 years.
• The qualifying income was calculated by excluding chargeable gains from the company's petroleum profits and then apportioning the result to reflect only income attributable to relevant petroleum leases, using a ratio of relevant lease income to total petroleum income.
• This section was repealed by section 55 of the Finance Act 2005 and ceased to have effect for accounting periods ending on or after 3 February 2005.