696C Charge to profit resource rent tax

(1) The tax is an additional amount of corporation tax, which applies to profits when the profits ratio is 1.5 or more.

(2) The tax rates are set out, depending on the profit ratio. These are as follows —

(3) The profits which this tax is charged on are set out as follows. The tax applies when the profit ratio is 1.5 or more. This means that the cumulative net profits (“A” in the profit ratio definition) can be up to 150% of the cumulative capital investment (“B” in the profit ratio definition) before the tax applies.

Only some of the total profits for an accounting period are subject to the new tax in the first accounting period (or any other accounting period where the ratio exceeds 1.5 but was less than 1.5 in the preceding accounting period). The calculation allows for the fact that some profits are not taxable at the higher rate. Because the calculation is based on the cumulative post-tax figures, it is necessary also to “gross-up” the amount (by dividing by 100 – 25 = 75 and multiplying by 100.

For other accounting periods, all of the profits in an accounting period are subject to the tax – taxable field profits is already defined.

Relevant Date: Finance Act 2019