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The treatment below applies where an unused transferred profit amount from the original election is treated as being part of the eligible ring fence profits of the original purchaser for the purposes of the subsequent TTH election. However, if they so wish, the original purchaser and the new purchaser may opt out of this treatment (see OT68050).

If no opt-out election is made, then original TTH amounts being treated as eligible ring fence profits of the original purchaser are transferred before any of the original purchaser鈥檚 own eligible ring fence profits. The original TTH amounts are transferred on a last-in first-out basis, up to the amount of the TTH cap. The TTH cap is recalculated on the onward transfer and so may be different to the cap calculated for the original election.

If, and only if, the cap is higher than the total of the original TTH amounts being treated as eligible ring fence profits of the original purchaser, the original purchaser鈥檚 own eligible ring fence profits may then be transferred, subject to agreement between the original and new purchaser.

Example

Company A sold its 80% interest in field X to company B on 1 January 2020, with TTH of 拢20m in 2017 and 拢30m in 2016. B had made profits of its own of 拢10m in each of those years. It made 拢5m profit every year from 2018-2023. The total net profit amount during B鈥檚 ownership was 拢25m.

On 1 January 2024 B sold the half of its interest in field X to company C. B and C make a TTH election, and the default treatment for onward sales applies. Because the new TTH asset is only 50% of the original TTH asset, FA19\Sch15\Para83(4)(b) applies. Consequently, only 50% of the original TTH amounts from the first TTH election are to be treated as being the eligible ring fence profits of company B. Thus, 拢10m of the original TTH amount for 2017 and 拢15m for 2016 are treated as eligible ring fence profits for B.

If the new TTH cap for the second election is calculated as 拢30m, the priority rules in FA19\Sch15\Para86 apply. This means that the amounts eligible to be transferred will be, firstly 拢10m from 2017 (50% of the original TTH amount for that year), then 拢15m from 2016 (50% of the original TTH amount for that year) and finally 拢5m from 2021.

When C calculates whether any of its TTH is activated, it will need to take account of the relevant proportion of B鈥檚 tracked profits for those accounting periods where B owned the interest that was transferred to C. Therefore, C will need to include 50% of B鈥檚 tracked profits (拢12.5m) from when B owned the interest, when calculating whether any TTH is activated.