Finance (No. 4) Bill

Session 2010 - 12
Internet Publications
Other Bills before Parliament

Finance (No. 4) Bill

Finance (No. 4) Bill
Schedule 21 — Relief in respect of decommissioning expenditure
523

Schedule 21
Section 183

Relief in respect of decommissioning expenditure
Restriction of relief available in respect of decommissioning expenditure
1
Part 8 of CTA 2010 (oil activities) is amended as follows.
2
In section 330 (supplementary charge in respect of ring fence trades), at the
5
end of subsection (2) insert—

“See also sections 330A and 330B (which provide for the amount of
adjusted ring fence profits to be further adjusted where
decommissioning expenditure has been taken into account).”
3
After section 330 insert—
10
“330A
Decommissioning expenditure taken into account in calculating ring
fence profits
(1)
This section applies where—
(a)
any decommissioning expenditure is taken into account in
calculating the amount mentioned in paragraph (a) of
15
subsection (3) of section 330 or the amount mentioned in
paragraph (b) of that subsection, and
(b)
if that expenditure were not so taken into account, the
amount of the adjusted ring fence profits of the company for
the accounting period would be greater than nil.
20
(2)
In calculating for the purposes of section 330(1) the amount of the
adjusted ring fence profits of the company for the accounting period,
there is to be added an amount equal to the appropriate fraction of
the used-up amount of that expenditure.
(3)
For the purposes of this section—
25
“the appropriate fraction” is
where SC is the percentage specified in section 330(1) for the
accounting period, and
“the used-up amount”, in relation to any expenditure, is the
difference between—
30
(a)
the adjusted ring fence profits of the company for the
accounting period determined in the absence of this
section (which may be nil), and
(b)
what the adjusted ring fence profits of the company
for that accounting period would be if that
35
expenditure were not taken into account as
mentioned in subsection (1).
(4)
In determining for the purposes of this section whether, and to what
extent, any losses which have been taken into account as mentioned
in subsection (1) are attributable to decommissioning expenditure—
40
(a)
assume that any amounts of any other expenditure which
could be taken into account in calculating those losses are

Finance (No. 4) Bill
Schedule 21 — Relief in respect of decommissioning expenditure
524

taken into account before any amounts of decommissioning
expenditure, and
(b)
where any losses have been surrendered in accordance with
Part 5, the company must specify, in accordance with a basis
determined jointly by the company, the surrendering
5
company (if different) and any other claimant company,
whether any of those losses is attributable to
decommissioning expenditure.
(5)
But if paragraph (a) of subsection (4) would work unfavourably in
the company’s case, the company may elect for that paragraph not to
10
apply in relation to it and for any amounts of expenditure which
could be taken into account in calculating those losses instead to be
taken into account in the order specified in the election.
(6)
In determining for the purposes of this section the used-up amount
of decommissioning expenditure, assume that any other amounts
15
that could be deducted in calculating the adjusted ring fence profits
of the company for the accounting period have already been so
deducted.
(7)
But if subsection (6) would work unfavourably in the company’s
case, the company may elect for that subsection not to apply in
20
relation to it and for any amounts that could be deducted in
calculating those adjusted ring fence profits instead to be deducted
in the order specified in the election.
(8)
For the purposes of this section, any deduction made under section
330B is to be disregarded.
25
(9)
This section does not apply in relation to any accounting period for
which the percentage specified in section 330(1) is less than or equal
to 20% (including any accounting period beginning before 24 March
2011 and ending on or after that date).
(10)
In this section—
30
“claimant company” and “surrendering company” are to be
read in accordance with Part 5 (see section 188), and
“decommissioning expenditure” has the meaning given by
section 330C.
330B
Decommissioning expenditure taken into account for PRT purposes
35
(1)
This section applies where—
(a)
any decommissioning expenditure is taken into account in
calculating the assessable profit accruing to a participator in
any chargeable period from an oil field, and
(b)
if that expenditure were not so taken into account, the
40
amount of petroleum revenue tax with which the participator
would be chargeable in respect of the field for the chargeable
period would be greater than nil.
(2)
In calculating for the purposes of section 330(1) the amount of the
participator’s adjusted ring fence profits for the relevant accounting
45
period, there is to be deducted an amount equal to the appropriate
fraction of the PRT difference.
(3)
For the purposes of this section—

Finance (No. 4) Bill
Schedule 21 — Relief in respect of decommissioning expenditure
525

“the appropriate fraction” is
where SC is the percentage specified in section 330(1) for the
relevant accounting period, and
“the PRT difference” is the difference between—
(a)
the amount of petroleum revenue tax with which the
5
participator is chargeable for the chargeable period
(which may be nil), and
(b)
the amount of petroleum revenue tax with which the
participator would be chargeable for that chargeable
period if the decommissioning expenditure were not
10
taken into account as mentioned in subsection (1).
(4)
In determining for the purposes of this section whether, and to what
extent, any allowable losses which have been taken into account as
mentioned in subsection (1) are attributable to decommissioning
expenditure, assume that any amounts of any other expenditure
15
which could be taken into account in calculating those losses are
taken into account before any amounts of decommissioning
expenditure.
(5)
But if subsection (4) would work unfavourably in the participator’s
case, the participator may elect for that subsection not to apply in
20
relation to it and for any amounts of expenditure which could be
taken into account in calculating those losses instead to be taken into
account in the order specified in the election.
(6)
This section does not apply in relation to any accounting period for
which the percentage specified in section 330(1) is less than or equal
25
to 20% (including any accounting period beginning before 24 March
2011 and ending on or after that date).
(7)
In this section—
“assessable profit” and “allowable loss” have the same meaning
as in Part 1 of OTA 1975 (see section 2 of that Act),
30
“decommissioning expenditure” has the meaning given by
section 330C, and
“the relevant accounting period”—
(a)
in a case where section 301 applies, is to be construed
in accordance with subsection (7) of that section, and
35
(b)
in any other case, means the accounting period for
which a deduction in respect of any petroleum
revenue tax with which the participator may be
chargeable for the chargeable period mentioned in
subsection (1) would be made under section 299(2)
40
(deduction of PRT in calculating income for
corporation tax purposes).
330C
Meaning of “decommissioning expenditure”
(1)
In sections 330A and 330B “decommissioning expenditure” means
expenditure incurred in connection with—
45
(a)
demolishing any plant or machinery,

Finance (No. 4) Bill
Schedule 21 — Relief in respect of decommissioning expenditure
526

(b)
preserving any plant or machinery pending its reuse or
demolition,
(c)
preparing any plant or machinery for reuse,
(d)
arranging for the reuse of any plant or machinery, or
(e)
the restoration of any land.
5
(2)
It is immaterial for the purposes of subsection (1)(b) whether the
plant or machinery is reused, is demolished or is partly reused and
partly demolished.
(3)
It is immaterial for the purposes of subsection (1)(c) and (d) whether
the plant or machinery is in fact reused.
10
(4)
In subsection (1)(e) “restoration” includes landscaping.
(5)
The Treasury may by order amend this section.
(6)
An order under subsection (5) may include transitional provision
and savings.”
4
In section 7 of FA 2011 (increase in rate of supplementary charge), in
15
subsection (6), at the end insert—

“See also sections 330A and 330B of CTA 2010 (which have effect in
relation to the separate accounting period consisting of so much of
the straddling period as falls on or after 24 March 2011).”
Extension of loss relief available in respect of decommissioning expenditure
20
5     (1)
In Chapter 2 of Part 4 of CTA 2010 (relief for trade losses), section 40 (ring
fence trades: extension of periods for which relief may be given) is amended
as follows.
      (2)
In subsection (1)(b), for the words from “for which” to the end substitute “for
which any allowances under section 164 or 403 of CAA 2001 are made to the
25
company in respect of decommissioning expenditure”.
      (3)
In subsection (3)—
(a)
for “the allowance” substitute “the sum of the allowances”, and
(b)
for “that allowance” substitute “that amount”.
      (4)
After that subsection insert—
30
“(3A)
In this section “decommissioning expenditure” has the meaning
given by section 330C.”
Application
6     (1)
The amendments made by this Schedule have effect in relation to
expenditure incurred in connection with decommissioning carried out on or
35
after 21 March 2012.
      (2)
In sub-paragraph (1) “decommissioning” means anything falling within any
of paragraphs (a) to (e) of section 330C(1) of CTA 2010 (as inserted by this
Schedule).