OT21023 - Corporation Tax Ring Fence and Supplementary Charge

Interest Received

In general, interest will not be within the ring fence. However, customers may be able to demonstrate that some short term deposit interest has arisen from deposits of current working capital. The latter includes funds raised for ring fence purposes but not immediately needed and funds which clearly come from surplus ring fence profits/receipts. Where those funds are to be used within a very short timeframe, say two or three weeks, on ring fence activities, the interest will be treated as being within the ring fence without prejudice and on a purely practical basis. In other circumstances a claim that interest is within the ring fence should be resisted. We look at the source of the income which is the deposit. The view is taken that lending money at interest is not a part of oil exploitation and it is not a ring fence activity but one step removed. The facts are some way apart but reference may be made to non-oil CT cases such as Bank Line Ltd v CIR 49 TC 307 and Nuclear Electric PLC v Bradley 68 TC 670 where the character and treatment of interest from funds ultimately earmarked for trading use were under consideration.