In the case of Centrica Energy Storage Ltd v HMRC [2026] UKFTT 566 (TC), the FTT has dismissed the company’s appeal confirming that the company was carrying out oil extraction activities and therefore the ring fence corporation tax and supplementary charge applied.
CORPORATION TAX – Section 272(3) Corporation Tax Act 2010 – Ring Fence Corporation Tax – whether Appellant carrying out “oil extraction activities” – yes – whether any of the activities carried out were not “oil extraction activities” – no – appeal dismissed
The FTT summarised the position as follows:
“This appeal concerns the corporation tax (‘CT’) treatment of the profits of the Appellant (‘CESL’) and more specifically whether, and if so to what extent, CESL carried out ‘oil extraction activities’, as defined by section 272(3) of the Corporation Tax Act 2010 (‘CTA 2010‘), for its wholly owned subsidiary, Centrica Offshore UK Ltd (‘COUK’). If CESL did carry out ‘oil extraction activities’, then the profits from those activities are subject to ring fence corporation tax (‘RFCT’) and the supplementary charge (‘SC’).
The Respondents (‘HMRC’) issued closure notices on 1 April 2022 for the accounting periods ending 31 December 2017 and 31 December 2018 on the basis that CESL’s income from the services that it provided to COUK for those periods did arise from ‘oil extraction activities’ (‘the Closure Notices’). The Closure Notices resulted in additional CT due from CESL of £2,124,944.80 for the accounting period ending 31 December 2017 and £3,234,826.85 for the accounting period ending 31 December 2018.”
CESL appealed on three grounds. The first two argued that if s. 272(3) was read purposively and in context then “extraction” could only mean lawful extraction by the licence holder or alternatively by (a) those who are lawfully entitled to extract (i.e. licence holders) and do so (i) themselves or (ii) through agents/subcontractors, or (b) those who have the ability to cause lawful extraction by the licence-holder and who have an economic interest in what is extracted. As COUK was the licence-holder, CESL, as the party physically carrying out the extraction, did not meet any such criteria and therefore did not carry on a ring fence trade. The third ground was that “In the event that it is found that the Appellant does carry on a trade inside the ring fence, the activities that the Respondents have assessed as being part of this trade are too broad as they extend beyond the profits made from ‘oil extraction activities’ “.
The FTT did not agree, judging that in respect of grounds one and two that:
“We therefore agree with HMRC that there is no doubt or ambiguity in the meaning of the words used in section 272(3) and that the external aids that we have been referred to, together with the history of the legislation, confirm that the clear and unambiguous meaning of the words was intended by Parliament and CESL’s oil extraction activities are therefore IRF [inside the ring fence].”
With regards to ground three, the FTT concluded that:
“Had CESL not been associated with the licence-holder COUK, its 15% mark-up would not be a ring fence receipt because it would not be IRF. However, because it is associated with the licence-holder COUK, all of its receipts for the provision of services under the Services Agreement are for oil extraction activities under that licence and are therefore IRF.”
https://caselaw.nationalarchives.gov.uk/ukftt/tc/2026/566
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