Energy (Windfall Gains in the Energy Sector) (Temporary Solidarity Contribution) Act 2023

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PART 4

Amendment of other acts

Insertion of new Part 24B in Act of 1997

23. The Act of 1997 is amended by the insertion of the following Part after Part 24A:

“PART 24B

Council Regulation (EU) 2022/1854 of 6 October 2022⁴ as regards temporary solidarity contribution

Interpretation

697R. (1) In this Part—

‘accounting period’ means an accounting period determined in accordance with section 27;

‘Act of 2023’ means the Energy (Windfall Gains in the Energy Sector) (Temporary Solidarity Contribution) Act 2023;

‘average taxable profits in respect of the reference years’ shall be construed in accordance with section 697T(1);

‘chargeable period’ has the same meaning as it has in the Act of 2023;

‘Council Regulation’ has the same meaning as it has in the Act of 2023;

‘energy company’ has the same meaning as it has in the Act of 2023;

‘relevant activities’ has the same meaning as it has in the Act of 2023;

‘taxable profits’ shall be construed in accordance with section 697S(1) ;

‘temporary solidarity contribution’ has the same meaning as it has in the Act of 2023.

(2) A word or expression which is used in this Part and which is also used in the Council Regulation has, unless the context otherwise requires, the same meaning in this Part as it has in the Council Regulation.

Taxable profits for purposes of temporary solidarity contribution

697S. (1) Subject to subsections (2) to (6), for the purpose of calculating the temporary solidarity contribution, taxable profits means so much of the total profits of the energy company for the accounting period, computed under section 76(3), that relate to relevant activities, reduced by—

(a) any charges on income paid by the company in the accounting period relating to relevant activities which are allowed as deductions against those total profits under section 243(2), and

(b) the amount of capital expenditure incurred on the construction or acquisition of a tangible asset—

(i) that is brought into use in the accounting period, where—

(I) the tangible asset is brought into use in any of the years 2018 to 2023, and

(II) the tangible asset is used in the course of carrying on relevant activities,

and

(ii) in respect of which allowances are made under Part 9 or Chapter 2 of Part 24.

(2) Where the tangible asset referred to in subsection (1)(b) ceases to be used in the course of carrying on relevant activities (except for reasonable periods of temporary disuse) at any time during the period of 5 years commencing on the day the tangible asset was first brought into use, then subsection (1)(b) shall not apply and the taxable profits for the accounting period in which the tangible asset was first brought into use shall be recalculated accordingly.

(3) Where a reduction may be made in the calculation of taxable profits for an accounting period under subsection (1)(b) (in this subsection referred to as the ‘first accounting period’) and the taxable profits for the first accounting period are less than zero, the taxable profits in the next accounting period shall be reduced by an amount determined by the following formula—

A-B

where—

A is the amount of capital expenditure referred to in subsection (1)(b) in respect of the first accounting period, and

B is the amount of taxable profits determined, in accordance with subsection (1) in respect of the first accounting period, as if subsection (1)(b) did not apply, but where that amount is less than zero, the amount shall be zero,

and the taxable profits in any subsequent accounting period shall be reduced in a like manner until the amount determined by the above formula has been exhausted.

(4) In ascertaining taxable profits for the purposes of subsection (1), no account shall be taken of any—

(a) relief under section 396(1) in respect of a loss incurred in the carrying on of a trade consisting of relevant activities in an accounting period that ends on or before 31 December 2017 or, where subsection (5)(a) applies, in a deemed accounting period that ends on 31 December 2017,

(b) relief under section 396(2), 396A(3) or 397(1) in respect of a loss incurred in the carrying on of a trade consisting of relevant activities in an accounting period that commences on or after 1 January 2024 or, where subsection (5)(b) applies, in a new accounting period that commences on 1 January 2024,

(c) amounts set off or surrendered under section 420 or 420A in an accounting period that falls wholly or partly within the period commencing on 1 January 2018 and ending on 31 December 2023, or

(d) temporary solidarity contribution incurred under the Act of 2023.

(5) (a) Where an energy company incurs a loss in the carrying on of a trade consisting of relevant activities in an accounting period that commences on or before 31 December 2017 and ends on or after 1 January 2018 (in this paragraph referred to as the ‘original accounting period’), then for the purposes of subsection (4)(a)—

(i) the accounting period of the company shall commence on the day on which the original accounting period began and shall be deemed to end on 31 December 2017 (in this section referred to as the ‘deemed accounting period’), and

(ii) the amount of the loss that shall be regarded as incurred in the carrying on of a trade consisting of relevant activities in the deemed accounting period shall be the amount determined by the following formula—

A x B

C

where—

A is the amount of the loss incurred in the original accounting period,

B is the length of the deemed accounting period, and

C is the length of the original accounting period.

(b) Where an energy company incurs a loss in the carrying on of a trade consisting of relevant activities in an accounting period that commences on or before 31 December 2023 and ends on or after 1 January 2024 (in this paragraph referred to as the ‘original accounting period’), then for the purposes of subsection (4)(b)—

(i) the accounting period of the company shall commence on the day on which the original accounting period began and shall be deemed to end on 31 December 2023,

(ii) a new accounting period shall be deemed to commence on 1 January 2024 and shall be deemed to end on the day on which the original accounting period ends (in this section referred to as the ‘new accounting period’), and

(iii) the amount of the loss that shall be regarded as incurred in the carrying on of a trade consisting of relevant activities in the new accounting period shall be an amount determined by the following formula—

A x B

C

where—

A is the amount of the loss incurred in the original accounting period,

B is the length of the new accounting period, and

C is the length of the original accounting period.

(6) (a) For the purposes of calculating the temporary solidarity contribution, the taxable profits shall be calculated in respect of the calendar year and where an accounting period of an energy company falls wholly or partly within that calendar year, the amount to be included in the taxable profits for the calendar year with reference to that accounting period shall be determined by the following formula—

A x B

C

where—

A is the taxable profits in respect of the accounting period,

B is the length of the period common to the calendar year and the accounting period, and

C is the length of the accounting period.

(b) The formula in paragraph (a) shall be applied to each accounting period that falls wholly or partly within the calendar year and the apportioned amounts shall be aggregated to determine the taxable profits in respect of the calendar year.

Average taxable profits for purposes of temporary solidarity contribution

697T. (1) Subject to subsections (2) and (3), the average taxable profits in respect of the reference years, in relation to relevant activities carried on by an energy company, means—

(a) where the energy company commenced the relevant activities on or before 31 December 2018, the average annual taxable profits in respect of the years commencing on 1 January 2018 and ending on 31 December 2021,

(b) where the energy company commenced the relevant activities on or after 1 January 2019 but before 1 January 2020, the average annual taxable profits in respect of the years commencing on 1 January 2019 and ending on 31 December 2021,

(c) where the energy company commenced the relevant activities on or after 1 January 2020 but before 1 January 2021, the average annual taxable profits in respect of the years commencing on 1 January 2020 and ending on 31 December 2021, or

(d) where the energy company commenced the relevant activities on or after 1 January 2021 but before 1 January 2022, the taxable profits in respect of the year commencing on 1 January 2021 and ending on 31 December 2021,

and where the average taxable profits in respect of the reference years in accordance with paragraph (a), (b), (c) or (d), as the case may be, is less than zero, the average taxable profits in respect of the reference years shall be deemed to be zero.

(2) For the purposes of subsection (1), where in a year commencing on or after 1 January 2018 but before 1 January 2022, an energy company carried on relevant activities for part of a year only, the taxable profits in respect of that year shall be determined by the following formula—

A/B x 12

where—

A is the taxable profits in the year, and

B is the number of months in that year during which the relevant activities were carried on by the energy company.

(3) (a) Where a company ceases to carry on relevant activities (in this subsection referred to as the ‘predecessor’) in the year commencing on 1 January 2022 or the year commencing on 1 January 2023, as the case may be, and another company begins to carry on those relevant activities (in this subsection referred to as the ‘successor’), for the purpose of determining the temporary solidarity contribution chargeable on the predecessor in the year in which the predecessor ceases to carry on the relevant activities, the average taxable profits in respect of the reference years for the predecessor shall be determined by the following formula—

A x B

C

where—

A is the average taxable profits in respect of the reference years of the predecessor in relation to those relevant activities,

B is the length of the period from the beginning of the year in which the predecessor ceases to carry on those relevant activities to the date the predecessor ceases to carry on those relevant activities, and

C is the length of the year.

(b) Subject to paragraph (c), where the predecessor ceases to carry on relevant activities in the year commencing on 1 January 2022 or the year commencing on 1 January 2023, as the case may be, and the successor begins to carry on those relevant activities, for the purpose of determining the temporary solidarity contribution chargeable on the successor in respect of the year in which the successor commences to carry on the relevant activities, the average taxable profits in respect of the reference years for the successor shall be determined by the following formula—

A x B

C

where—

A is the average taxable profits in respect of the reference years of the predecessor in relation to those relevant activities,

B is the length of the period from the date the successor begins to carry on those relevant activities to the end of the year in which the successor begins to carry on those relevant activities, and

C is the length of the year.

(c) Where the predecessor ceases to carry on relevant activities in the year commencing on 1 January 2022 and the successor begins to carry on those relevant activities in that year, for the purpose of determining the temporary solidarity contribution chargeable on the successor for the year 2023, the average taxable profits in respect of the reference years shall be the average taxable profits in respect of the reference years of the predecessor in relation to those relevant activities determined in accordance with this section and no apportionment shall be required under paragraph (b).

Deductibility of temporary solidarity contribution for corporation tax

697U. (1) In computing the amount of the profits or gains to be charged to tax under Case I of Schedule D, a deduction shall be allowed in respect of the temporary solidarity contribution incurred by an energy company in an accounting period.

(2) No amount shall be deducted under subsection (1) if that amount has been allowed under any other provision of the Tax Acts.”.

⁴ OJ L 261, 7.10.2022, p.1