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General rules

The normal UK tax rules apply to the oil industry with certain modifications. Where a person carries any of the following activities within the UK, its territorial waters or in a designated area of the UK continental shelf, those activities are treated for all purposes of income and corporation tax, as a separate trade (the 'ring fence' trade), distinct from all other activities carried on by that person as part of the trade¹:

1. Ìý

   •ÌýÌýÌýÌý any oil extraction activities²; and

2. Ìý

   •ÌýÌýÌýÌý the activities of acquisition, enjoyment or exploitation of oil rights³

Definitions of these are also set out at 'Oil and gas definitions' below.

Income such as tariff receipts and tax-exempt tariffing receipts are specifically brought within the ring fence⁴. For accounting periods beginning on or after 1 January 2018, HMRC will regard all activities by UK petroleum licence holders giving rise to tariff income in relation to UK oil and gas assets as oil extraction activities, removing