Session 2012 - 13
Internet Publications
Other Bills before Parliament

Finance Bill


Finance 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 —

SC−20%

SC

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 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 Bill
Schedule 21 — Relief in respect of decommissioning expenditure

525

 

“the appropriate fraction” is

SC−20%

SC

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 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).

 
 

 
previous section contents continue
 

© Parliamentary copyright
Revised 9 May 2012