OT17760 - PRT: Safeguard - Deferred Expenditure Claims - Example 1

Example 1: Full Disallowance of Expenditure

A company鈥檚 safeguard capital base is 拢600m. Its final period of safeguard is 1H01.

The 1H01 assessment is as follows (for simplicity鈥檚 sake, provisional allowance and oil allowance have been ignored):

Gross Profit: 拢90m

Safeguard: 拢90m *

PRT: 拢0

*15% of 拢600m equals 拢90m (the adjusted profit) so no PRT is due.

On 28 February 2002, the return for 2H01 is submitted including a claim of 拢20m operating expenditure for the claim period 1H01.

If this claim had been allowed before the making of the 1H01 assessment, the assessment would have shown:

Gross Profit: 拢90m

Operating Expenditure: 拢20m

Safeguard: 拢70m *

PRT: 拢0

*15% of 拢600m is greater than 拢70m (the adjusted profit) so no PRT is due.

Because the only affect of allowing the operating expenditure before the making of the 1H01 assessment would have been to 鈥渄isplace鈥� safeguard, the 拢20m is disallowed - it cannot gain effective tax relief in 2H01.