Session 2012 - 13
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Finance (No. 2) Bill


Finance (No. 2) Bill
Part 2 — Oil

45

 

82      

Claims under agreement not to affect oil allowance

(1)   

This section applies where—

(a)   

a company defaults on a liability under—

(i)   

a relevant agreement, or

(ii)   

an abandonment programme,

5

   

to make a payment towards decommissioning expenditure in respect

of an oil field,

(b)   

in consequence of the default, another company that has rights under a

decommissioning relief agreement at the time of the default incurs

decommissioning expenditure in respect of that oil field, and

10

(c)   

by virtue of section 80, any expenditure incurred by that company

(whether or not that decommissioning expenditure) is treated as

having been used by that company or any other company (“the affected

company”) to reduce its assessable profit in a chargeable period in a

particular way.

15

(2)   

If, in the absence of section 80, the assessable profit accruing to the affected

company from an oil field in that chargeable period would be reduced under

section 8(1) of OTA 1975, the amount of the oil allowance for the oil field

utilised by the affected company in that chargeable period for the purposes of

section 8 of that Act is to be determined as if section 80 did not apply.

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(3)   

In this section—

“abandonment programme” means an abandonment programme

approved under Part 4 of the Petroleum Act 1998 (including such a

programme as revised),

“company” has the meaning given by section 1121 of CTA 2010,

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“decommissioning expenditure” has the same meaning as in section 77,

“decommissioning relief agreement” has the same meaning as in that

section,

“oil field” has the same meaning as in OTA 1975, and

“relevant agreement” has the meaning given by section 104(5)(a) of FA

30

1991.

Decommissioning security settlements

83      

Removal of IHT charges in respect of decommissioning security settlements

(1)   

In Chapter 3 of Part 3 of IHTA 1984 (settled property: settlements without

interests in possession etc), section 58 (relevant property) is amended as

35

follows.

(2)   

In subsection (1), omit the “and” at the end of paragraph (ea) and before

paragraph (f) insert—

“(eb)   

property comprised in a decommissioning security settlement;

and”.

40

(3)   

At the end insert—

“(6)   

For the purposes of subsection (1)(eb) above a settlement is a

“decommissioning security settlement” if the sole or main purpose of

the settlement is to provide security for the performance of obligations

under an abandonment programme.

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Finance (No. 2) Bill
Part 2 — Oil

46

 

(7)   

In subsection (6)—

“abandonment programme” means an abandonment programme

approved under Part 4 of the Petroleum Act 1998 (including

such a programme as revised);

“security” has the same meaning as in section 38A of that Act.”

5

(4)   

This section is treated as having come into force on 20 March 1993.

(5)   

For the purposes of section 58 of IHTA 1984—

(a)   

any reference in that section to Part 4 of the Petroleum Act 1998 has

effect, in relation to any period before the coming into force of that Part,

as a reference to Part 1 of the Petroleum Act 1987, and

10

(b)   

section 38A of the Petroleum Act 1998 is to be treated as having come

into force at the same time as this section.

(6)   

There is to be no charge to tax under section 65 of IHTA 1984 if the only reason

for such a charge would be that property ceases to be relevant property by

virtue of the coming into force of this section.

15

84      

Loan relationships arising from decommissioning security settlements

(1)   

In Part 8 of CTA 2010 (oil activities), after section 287 insert—

“287A   

Restriction where debits or credits relate to decommissioning security

settlement

(1)   

No debits or credits are to be brought into account for the purposes of

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Part 5 of CTA 2009 (loan relationships) in respect of a company’s loan

relationship so far as the loan relationship is in respect of property

comprised in a decommissioning security settlement.

(2)   

For the purposes of this section a settlement is a “decommissioning

security settlement” if the sole or main purpose of the settlement is to

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provide security for the performance of obligations under an

abandonment programme.

(3)   

In subsection (2)—

“abandonment programme” means an abandonment programme

approved under Part 4 of the Petroleum Act 1998 (including

30

such a programme as revised), and

“security” has the same meaning as in section 38A of that Act.”

(2)   

In section 464 of CTA 2009 (priority of Part 5 for corporation tax purposes), in

subsection (3)(e), for “and 287” substitute “to 287A”.

(3)   

The amendments made by this section have effect in relation to accounting

35

periods beginning on or after the day on which this Act is passed.

Decommissioning expenditure etc

85      

Decommissioning expenditure taken into account for PRT purposes

(1)   

Section 330B of CTA 2010 (decommissioning expenditure taken into account

for PRT purposes) is amended as follows.

40

(2)   

In subsection (1), omit the “and” at the end of paragraph (a) and after

 
 

Finance (No. 2) Bill
Part 2 — Oil

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paragraph (b) insert “, and

(c)   

an amount equal to the appropriate fraction of the used-up

amount of that expenditure is added under section 330A(2) in

calculating the participator’s adjusted ring fence profits for an

accounting period.”

5

(3)   

For subsection (2) substitute—

“(2)   

In calculating for the purposes of section 330(1) the amount of the

participator’s adjusted ring fence profits for the accounting period,

there is to be deducted the amount given by—equation: times[char[R],cross[char[P],times[char[A],cross[char[F],char[D]]]]]

   

where—

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RP is the relevant percentage of the decommissioning

expenditure,

AF is the appropriate fraction, and

D is the PRT difference.”

(4)   

In subsection (3)—

15

(a)   

before the definition of “the appropriate fraction” insert—

““the relevant percentage of the decommissioning

expenditure” is the percentage of that expenditure that

is the used-up amount referred to in subsection (1)(c),”;

(b)   

in the definition of “the appropriate fraction”, omit “relevant”;

20

(c)   

in the definition of “the PRT difference”, for “subsection (1)” substitute

“subsection (1)(a)”.

(5)   

In subsection (4), for “subsection (1)” substitute “subsection (1)(a)”.

(6)   

In subsection (7)—

(a)   

omit the definition of “the relevant accounting period”, and

25

(b)   

at the end insert—

““the used-up amount”, in relation to any expenditure, has

the same meaning as in section 330A (see subsection (3)

of that section).”

(7)   

The amendments made by this section have effect in relation to expenditure

30

incurred in connection with decommissioning carried out on or after the day

on which this Act is passed.

86      

Miscellaneous amendments relating to decommissioning

(1)   

Part 1 of Schedule 29 contains provision about expenditure on and under

abandonment guarantees and abandonment expenditure.

35

(2)   

Part 2 of Schedule 29 contains provision about calculating the profits of a ring

fence trade carried on by a person who incurs expenditure on meeting another

person’s decommissioning liabilities.

 
 

Finance (No. 2) Bill
Part 2 — Oil

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Capital allowances

87      

Expenditure on decommissioning onshore installations

(1)   

Section 163 of CAA 2001 (meaning of “general decommissioning expenditure”)

is amended as follows.

(2)   

In subsection (1)—

5

(a)   

the words after “if” become paragraph (a) of that subsection,

(b)   

in that paragraph, for “subsections (3) to (4)” substitute “subsections

(3), (3A) and (4)”, and

(c)   

at the end of that paragraph insert “, or

(b)   

the conditions in subsections (3B) and (4) are met.”

10

(3)   

After subsection (3A) insert—

“(3B)   

The expenditure must have been incurred on decommissioning plant

or machinery—

(a)   

which has been brought into use wholly or partly for the

purposes of a ring fence trade, and

15

(b)   

which—

(i)   

is, or forms part of, a relevant onshore installation, or

(ii)   

when last in use for the purposes of a ring fence trade,

was, or formed part of, such an installation.

(3C)   

In subsection (3B) “relevant onshore installation” means any building

20

or structure which—

(a)   

falls within any of sub-paragraphs (ii) to (iv) of section 3(4)(c) of

OTA 1975,

(b)   

is not an offshore installation, and

(c)   

is or has been used for purposes connected with the winning of

25

oil from an oil field any part of which lies within—

(i)   

the boundaries of the territorial sea of the United

Kingdom, or

(ii)   

an area designated under section 1(7) of the Continental

Shelf Act 1964.”

30

(4)   

In subsection (5)(a), for ““oil field” has” substitute ““oil” and “oil field” have”.

(5)   

The amendments made by this section have effect in relation to expenditure

incurred on decommissioning carried out on or after the day on which this Act

is passed.

88      

Expenditure on decommissioning certain redundant plant or machinery

35

(1)   

In section 164 of CAA 2001 (general decommissioning expenditure incurred

before cessation of ring fence trade), after subsection (1B) insert—

“(1C)   

If the plant or machinery concerned is incidentally-acquired redundant

plant or machinery (see subsection (1D)), it is to be regarded for the

purposes of this section as having been brought into use for the

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purposes of the ring fence trade.

(1D)   

Plant or machinery is “incidentally-acquired redundant plant or

machinery” if—

 
 

Finance (No. 2) Bill
Part 2 — Oil

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(a)   

it has not been brought into use for the purposes of the ring

fence trade,

(b)   

it forms part of a relevant installation (see subsection (1E))

which has been brought into use for the purposes of the ring

fence trade,

5

(c)   

at the time R acquired an interest in the relevant installation, the

plant or machinery was not being used for any purposes, and

(d)   

the acquisition of the interest in the plant or machinery was

merely incidental to the acquisition of the interest in the

relevant installation.

10

(1E)   

For the purposes of subsection (1D)—

“relevant installation” means—

(a)   

an offshore installation,

(b)   

a submarine pipeline, or

(c)   

a relevant onshore installation;

15

“offshore installation” and “submarine pipeline” have the same

meaning as in Part 4 of the Petroleum Act 1998;

“relevant onshore installation” has the meaning given by section

163(3C).”

(2)   

The amendment made by this section has effect in relation to expenditure

20

incurred on decommissioning carried out on or after the day on which this Act

is passed.

89      

Expenditure on site restoration

(1)   

Part 5 of CAA 2001 (mineral extraction allowances) is amended as follows.

(2)   

In section 395 (qualifying expenditure), in subsection (1)(d), omit “post-

25

trading”.

(3)   

In section 403 (qualifying expenditure on acquiring a mineral asset), after

subsection (2) insert—

“(2A)   

For the purposes of this section the reference to expenditure on

acquiring a mineral asset does not include expenditure incurred on the

30

restoration of a relevant site (within the meaning of section 416 or

416ZA).”

(4)   

In section 416 (expenditure on restoration within 3 years of ceasing to trade)—

(a)   

in subsections (1)(a) and (6)(a), before “mineral extraction trade” insert

“relevant”;

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(b)   

in subsection (5), at the end insert—

   

“But it does not include decommissioning any plant or

machinery (within the meaning of section 163).”;

(c)   

after subsection (7) insert—

“(7A)   

“Relevant mineral extraction trade” means a mineral extraction

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trade that is not a ring fence trade within the meaning of Part 8

of CTA 2010 (see section 277 of that Act).”;

(d)   

the heading of section 416 becomes “Non-ring fence trades:

expenditure on restoration within 3 years of ceasing to trade”.

 
 

Finance (No. 2) Bill
Part 2 — Oil

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(5)   

In Chapter 5, after section 416 insert—

“416ZA  

Ring fence trades: expenditure on site restoration

(1)   

If—

(a)   

a person who is carrying on, or has ceased to carry on, a ring

fence trade incurs expenditure on the restoration of a relevant

5

site,

(b)   

that part of the restoration work to which the expenditure

relates has been carried out, and

(c)   

the expenditure has not been deducted in calculating for tax

purposes the profits of any trade carried on by the person,

10

   

the net cost of the restoration is qualifying expenditure for the relevant

period in which that part of the work to which the expenditure relates

was carried out.

(2)   

“Relevant period” means—

(a)   

in the case of restoration work carried out while the person is

15

carrying on the trade, a chargeable period, and

(b)   

in the case of restoration work carried out after the person has

ceased to carry on the trade, a notional accounting period.

   

For the meaning of “notional accounting period”, see section 416 ZB.

(3)   

The qualifying expenditure for a notional accounting period is treated

20

as incurred on the last day of trading.

(4)   

If the amount of expenditure incurred on any part of the restoration

work carried out in a relevant period is disproportionate to that part of

the restoration work, only so much of the net cost of the restoration as

is proportionate to that part of the restoration work (the “allowable

25

expenditure for the period”) is to be treated as qualifying expenditure

for that period.

(5)   

But subsection (4) does not prevent that part of the expenditure that is

not allowable expenditure for the period from being treated as

qualifying expenditure for a subsequent relevant period.

30

(6)   

If any expenditure incurred by a person is qualifying expenditure

under this section—

(a)   

the whole of the expenditure on the restoration (not just the net

cost) is not deductible in calculating the person’s income for any

tax purposes, and

35

(b)   

none of the amounts subtracted to produce the net cost is to be

treated as the person’s income for any tax purposes.

(7)   

“Restoration” includes—

(a)   

landscaping,

(b)   

in relation to land in the United Kingdom, the carrying out of

40

any works required as a condition of granting planning

permission for development relating to the winning of oil from

an oil field,

(c)   

in relation to land in the UK marine area, the carrying out of any

works required in order to comply with—

45

(i)   

an approved abandonment programme,

 
 

Finance (No. 2) Bill
Part 2 — Oil

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(ii)   

a condition to which the approval of an abandonment

programme is subject, or

(iii)   

a requirement imposed by the Secretary of State, or an

agreement made with the Secretary of State, in relation

to a relevant site, and

5

(d)   

in relation to land in a foreign sector of the continental shelf, the

carrying out of any works required in order to comply with

anything corresponding to a matter within paragraph (c)(i), (ii)

or (iii) under the law of a territory outside the United Kingdom.

   

But it does not include decommissioning any plant or machinery

10

(within the meaning of section 163).

(8)   

A “relevant site” means—

(a)   

the site of a source to the working of which the ring fence trade

relates (or related), or

(b)   

land used in connection with working such a source.

15

(9)   

“The net cost of the restoration” means the expenditure incurred on the

restoration less any amounts that—

(a)   

are received, or are to be received, by the person, and

(b)   

are attributable to the restoration of the relevant site.

(10)   

All such adjustments are to be made, by way of discharge or repayment

20

of tax or otherwise, as are necessary to give effect to this section.

(11)   

In this section—

“abandonment programme”, “approval” and “approved” (in

relation to an abandonment programme) have the same

meaning as in Part 4 of the Petroleum Act 1998,

25

“foreign sector of the continental shelf” means an area within

which rights are exercisable with respect to the sea bed and

subsoil and their natural resources by a territory outside the

United Kingdom,

“oil” and “oil field” have the same meaning as in Part 1 of OTA

30

1975,

“ring fence trade” has the same meaning as in Part 8 of CTA 2010

(see section 277 of that Act), and

“UK marine area” has the meaning given by section 42 of the

Marine and Coastal Access Act 2009.

35

416ZB   

“Notional accounting period”

(1)   

For the purposes of section 416ZA “notional accounting period”, in

relation to a person (“the former trader”) who has ceased to carry on a

ring fence trade, means each of the following periods—

(a)   

the period that—

40

(i)   

begins with the day following the last day on which the

former trader carried on the ring fence trade, and

(ii)   

ends with the day on which the first termination event

subsequently occurs, and

(b)   

each period that—

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(i)   

begins with the day following the last day of a period

determined under paragraph (a) or this paragraph, and

 
 

 
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Revised 28 March 2013