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Maersk Oil North Sea UK Ltd and Maersk Oil UK Ltd v HMRC – First-tier Tribunal

Maersk Oil North Sea UK Ltd v HMRC

The FTT ruled that a proposed profit apportionment was just and reasonable.


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The companies in this case are in the oil and gas trade, and are subject to UK corporation tax on the ring-fenced profit of those trading activities, subject to a supplementary tax charge. The rate of this supplementary charge increased on 23 March 2011, and the legislation that introduced this change stated that in the case of an accounting period that straddled this date, profits should be time apportioned when calculating what rate should apply, unless this would give rise to an unreasonable or unjust result. The returns made by the companies apportioned their profits on an actual basis instead, which was rejected by HMRC. The First-tier Tribunal (FTT) has found in favour of the companies’ method of apportionment.

Both companies had made irregular profits during the year in question due to a variety of reasons, mainly related to unexpected maintenance work. For this reason, they had elected to use another method of apportionment which would give a more favourable result than time apportionment, which was based on their monthly internal financial reporting. HMRC objected to their proposed method and put forward their own method, which resulted in a higher supplementary tax charge. 

The FTT accepted the companies’ reasoning that they did not need to prove that their method was the most just and reasonable basis, only that it was a just and reasonable basis. HMRC could not object to the method solely on the basis that the companies’ method resulted in all of their profits being taxed at a lower rate. 

For more information please contact:

Chris Davidson

Claire Angell

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