OT42440 - Non-residents working on the UK continental shelf: computation of profits: loan relationships - application to offshore contractors
»Ê¹ÚÌåÓýapp general guidance for taxing loan relationships following on from the major changes in Finance Act 2002 is at CFM50000.
»Ê¹ÚÌåÓýapp two most common situations that arise on the UK Continental Shelf are:
- a non-resident company has significant borrowings on its vessel fleet, but most of the fleet have no connection with the UKCS, or
- a non-resident company has a mortgage on a vessel which for part of the year has a UKCS activity.
In these circumstances, the treatment of the interest on the borrowings is governed by CTA2009\S441 and S442, which provides for a just and reasonable apportionment of the loan relationship debit so as to exclude that element related to an ‘unallowable purpose� which, in this context, is regarded as the element not directly attributable to the activities of the UK permanent establishment. What is a ‘just and reasonable apportionment� is arrived at by agreement between LB Oil & Gas and the company having regard to the facts and circumstances in each individual case.