Taxes Consolidation Act 1997 section 696B

Interpretation and application (Chapter 3)

Section 696B defines the key terms used in the profit resource rent tax regime, which applies to petroleum leases entered into following on from exploration licences awarded between 1 January 2007 and 17 June 2014, and sets out the ring-fencing rules for taxable field activities.

• The profit ratio for a taxable field is the company's cumulative field profits divided by its cumulative field expenditure, both accumulated from 1 January 2007 onwards, and this ratio determines whether profit resource rent tax applies and at what rate.
• A taxable field is an area covered by a petroleum lease granted on foot of a specified licence (being an exploration licence or reserved area licence granted between 1 January 2007 and 17 June 2014, or a licensing option), and taxable field expenditure covers abandonment, development and exploration capital expenditure.
• Petroleum activities carried on under a specified licence are treated as a separate trade in respect of each taxable field, with profits and expenditure apportioned on a just and reasonable basis, and the existing petroleum trade ring-fencing rules apply to each field.
• Capital expenditure incurred on or after 1 January 2007 in an area that later becomes a taxable field is treated as incurred on the date the area first becomes a taxable field, and charges, interest and losses from other activities or other companies cannot be set against taxable field profits.