697T Average Taxable profits for purposes of temporary solidarity contribution

Summary

This section sets out the rules for determining the average taxable profit in respect of the reference years of an energy company.

Details

(1) Provides a definition of “average taxable profits in respect of the reference years” in relation to relevant activities in the years 2018 to 2021.

Where relevant activities commenced on or before 31 December 2018, the average taxable profits in respect of the reference years are calculated as an annual average for the period 1 January 2018 to 31 December 2021.

Where the relevant activities commenced on or after 1 January 2019, the average taxable profits in respect of the reference years of the energy company are the annual average taxable profits arising from 1 January in the year the relevant activities commenced to 31 December 2021.

Where the amount of average taxable profits in respect of the reference years is calculated to be a negative amount (i.e. less than zero), the amount is deemed to be zero for the purposes of calculating the temporary solidarity contribution.

(2) For the purposes of subsection (1), where the relevant activities commenced after 1 January 2018 but before 1 January 2022, the taxable profits of the calendar year in which those relevant activities commenced are grossed up to an annual equivalent amount.

(3) This subsection contains provisions to deal with scenarios where a successor company takes over the relevant activities of a predecessor company in the years 2022 or 2023 and the relevant activities are not permanently discontinued.

(3)(a) This paragraph provides that, for the purposes of calculating the temporary solidarity contribution due by the predecessor company, the average taxable profits in respect of the reference years of the predecessor company must be apportioned on a time basis in line with the length of time that the predecessor carried on the relevant activities in that chargeable period relative to the calendar year.

(3)(b) This paragraph provides that, for the purposes of calculating the temporary solidarity contribution due by the successor company, the average taxable profits in respect of the reference years of the predecessor company must be apportioned on a time basis in line with the length of time that the successor carried on the relevant activities in that chargeable period relative to the calendar year, and such portion is deemed to be the average taxable profits in respect of the reference years of the successor company.

(3)(c) This paragraph provides that, where the relevant activities are taken over by a successor company in the year 2022, no adjustment is required under subsection (3)(b) in respect of the year 2023. The average taxable profits in respect of the reference years of the predecessor company is deemed to be the average taxable profits in respect of the reference years of the successor company.

Relevant Date: Finance Act 2024