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provisions of the U.K. corporation tax generally applicable to
U.K. corporate taxpayers.
The Ring Fence Tax applies3 only to companies producing oil
and gas and to related activities in the North Sea, and it erects
a “ring fence” around oil and gas activities in the North Sea by
requiring oil and gas companies to segregate income and expenses
attributable to North Sea activity from income and expenses
attributable to activity unrelated to the North Sea.
The Ring Fence Tax was enacted under the U.K.’s sovereign
taxing power, and under U.K. law it constitutes a tax on income.
The Ring Fence Tax is structured as a corporate income
tax.
Along with other U.K. taxes such as the U.K. corporation
income tax and the Ring Fence Tax, under U.K. law, PRT was
intended, is structured, and is regarded as a tax. PRT was
imposed unilaterally by the United Kingdom and was administered
as a tax by the U.K. Inland Revenue.
With regard to North Sea oil and gas recovery activities,
the Ring Fence Tax and PRT are imposed in substitution for, and
not in addition to, the generally applicable U.K. corporation
tax. Oil and gas companies operating in the North Sea are
liable, with regard to such activity, for the Ring Fence Tax and
3 In this Opinion, we often use the present tense to describe
provisions of the Ring Fence Tax and PRT even though PRT was
eliminated in 1993.
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