(3) Subsections (4) to (9) apply for the purposes of this section and
sections 165B to 165E.

(4) References to providing a service include—

(a) letting a ship on charter or any other asset on hire, and

(b) 5providing goods which are to be used up in the course of
providing a service.

(5) “Decommissioning expenditure” means expenditure in connection
with decommissioning.

(6) “Decommissioning” means—

(a) 10demolishing plant or machinery,

(b) preserving plant or machinery pending its reuse or
demolition,

(c) preparing plant or machinery for reuse, or

(d) arranging for the reuse of plant or machinery.

(7) 15It is immaterial for the purposes of subsection (6)(b) whether the
plant or machinery is reused, is demolished or is partly reused and
partly demolished.

(8) It is immaterial for the purposes of subsection (6)(c) and (d) whether
the plant or machinery is in fact reused.

(9) 20References to R’s expenditure under the arrangement are to so much
of the consideration for the service as is decommissioning
expenditure incurred by R.

165B Restriction on allowance available

(1) The amount, if any, by which R’s expenditure under the
25arrangement exceeds D is to be left out of account in determining R’s
available qualifying expenditure.

(2) D is the cost to S of providing the service or, if R’s expenditure under
the arrangement relates to only part of the service, that part.

(3) Subsection (2) is subject to sections 165C and 165D, which provide
30for D to be calculated differently in certain circumstances.

(4) But if, under any arrangement, a particular service or part of a
service is provided by more than one person who is connected with
R (so that without this subsection there would be more than one
amount for D in relation to that service or part), D is the lowest of
35those amounts.

165C Allowance in respect of certain services related to decommissioning

(1) This section applies to so much of R’s expenditure under the
arrangement as relates to the supply by S of a service if—

(a) the service is a planning or project management service, and

(b) 40the cost plus method is an appropriate method of applying
the arm’s length principle to the provision of it.

(2) D is the sum of—

(a) the cost to S of providing the service or, if R’s expenditure
under the arrangement relates to only part of the service, that
part, and

(b) the appropriate percentage of that amount.

(3) 5The appropriate percentage is the smaller of—

(a) the appropriate mark up determined in accordance with the
cost plus method, and

(b) 10%.

(4) Any expression which is used in this section and in the transfer
10pricing guidelines has the meaning given in those guidelines.

“The transfer pricing guidelines” has the meaning given by section
164(4) of TIOPA 2010.

“The transfer pricing guidelines” has the meaning given by section
164(4) of TIOPA 2010.

165D 15Allowance where decommissioning undertaken for other
participators in oil field

(1) This section applies where—

(a) S decommissions the plant or machinery,

(b) there are, in addition to R, one or more other participators in
20the relevant field, and

(c) the expenditure incurred in respect of the decommissioning
is apportioned between the participators (including R) in
accordance with their shares in the oil won from the relevant
field or their shares in the equity of that field.

(2) 25D is the part of the expenditure referred to in subsection (1)(c) which
is incurred by R.

(3) Where—

(a) plant or machinery is or has been used in connection with the
winning of oil from more than one relevant field, and

(b) 30the expenditure incurred in respect of the decommissioning
is apportioned between those fields in accordance with the
contribution from each field to the total of the oil won using
that plant or machinery,

subsections (1) and (2) apply to each such field as if subsection (1)(c)
35referred to the expenditure apportioned to that field.

(4) But subsections (2) and (3) do not apply (and section 165B(2) applies
instead) if—

(a) the amount of consideration, or the method of determining
the amount of consideration, to be received by S under the
40arrangement or arrangements, or

(b) the apportionment of the liability for that consideration
(whether between the participators as mentioned in
subsection (1)(c) or between the fields as mentioned in
subsection (3)(b)),

45has been agreed as, or as part of, an avoidance scheme.

(5) A scheme is an “avoidance scheme” if the main purpose, or one of the
main purposes, of a party in entering into the scheme is to enable a
person to obtain a tax advantage under this Part that would not
otherwise be obtained.

(6) The reference in subsection (5) to obtaining a tax advantage that
would not otherwise be obtained includes obtaining an allowance
that is in any way more favourable to a person than the one that
would otherwise be obtained.

(7) 5In this section—

• “licensee”, “oil” and “oil field” have the same meaning as in Part
  1 of OTA 1975,

• “other participator” means a person, not connected with R, who
  is a licensee in respect of any licensed area wholly or partly
  10included in the oil field in question, and

• “relevant field” means an oil field—

  (a)

  in which plant or machinery is located, or

  (b)

  in connection with which the plant or machinery is
  being or has been used for the purposes of a ring fence
  15trade.

165E Transaction to obtain tax advantage

(1) Allowances under this Part are restricted under subsection (5) if—

(a) a person (“R”) who is carrying on, or has ceased to carry on,
a ring fence trade enters into a transaction with another
20person (“S”),

(b) S receives from R consideration for services provided in
pursuance of the transaction,

(c) all or part of that consideration is decommissioning
expenditure, and

(d) 25the transaction either has an avoidance purpose, or is part of,
or occurs as a result of, a scheme or arrangement that has an
avoidance purpose.

(2) Subsection (1)(d) may be satisfied—

(a) whether the scheme or arrangement was made before or after
30the transaction was entered into, and

(b) whether or not the scheme or arrangement is legally
enforceable.

(3) A transaction, scheme or arrangement has an “avoidance purpose” if
the main purpose, or one of the main purposes, of a party in—

(a) 35entering into the transaction, scheme or arrangement, or

(b) agreeing an amount of consideration, or a method of
determining an amount of consideration, to be paid in
pursuance of the transaction, scheme or arrangement,

is to enable a person to obtain a tax advantage under this Part that
40would not otherwise be obtained.

(4) The reference in subsection (3) to obtaining a tax advantage that
would not otherwise be obtained includes obtaining an allowance
that is in any way more favourable to a person than the one that
would otherwise be obtained.

(5) 45All or part of R’s expenditure under the transaction is to be left out
of account in determining R’s available qualifying expenditure.

(6) The amount of expenditure to be left out of account is—

(a) such amount as would or would in effect cancel out the tax
advantage mentioned in subsection (3) (whether that
advantage is obtained by R or another person and whether it
relates to the transaction or something else), or

(b) 5if the amount found under paragraph (a) exceeds the whole
of R’s expenditure under the transaction, the whole of that
expenditure.”

3 In section 26(5), at the end insert “and sections 165A to 165E (restrictions on
allowances: anti-avoidance).”

4 10In section 57(3), after the reference to section 70DA insert—

• “sections 165A to 165E (restrictions on allowances: anti-
  avoidance);”.

5 In section 161C(3), for “and 164(4)” substitute “, 164(4) and 165A to 165E”.

6 In section 164(5A), at the end insert “and sections 165A to 165E.”

7 15After section 165(3) insert—

“(3A) Subsection (3) is subject to sections 165A to 165E.”

8 The amendments made by this Part have effect in relation to expenditure
incurred on decommissioning carried out on or after the day on which this
Act is passed.

20Part 2 Expenditure on site restoration

9 After section 416ZB of CAA 2001 (inserted by section 89) insert—

“416ZC Site restoration services supplied by connected person

(1) Where—

(a) 25a person (“R”) who is carrying on, or has ceased to carry on,
a ring fence trade enters into an arrangement,

(b) under the arrangement, a person (“S”) who is connected with
R provides a service to R in connection with work on the
restoration of a relevant site, and

(c) 30(in the absence of this section) all or part of the consideration
for the service would be qualifying expenditure of R under
section 416ZA,

the amount of the expenditure which is qualifying expenditure is
restricted under section 416ZD(1).

(2) 35Subsection (1)(b) may be satisfied whether the service is provided to
R directly or indirectly; and in particular it does not matter—

(a) whether R and S are parties to the same contract, or

(b) whether payments are made by R directly to S.

(3) Subsections (4) and (5) apply for the purposes of this section and
40sections 416ZD and 416ZE.

(4) “Relevant site” has the meaning given by section 416ZA(8).

(5) References to providing a service include—

(a) letting a ship on charter or any other asset on hire, and

(b) providing goods which are to be used up in the course of
providing a service.

416ZD Restriction on allowance available

(1) 5In determining how much of the consideration for the service is
qualifying expenditure, there is to be left out of account the amount
(if any) by which that consideration exceeds D.

(2) D is the cost to S of providing the service or, if the qualifying
expenditure relates to only part of the service, that part.

(3) 10Subsection (2) is subject to—

(a) subsection (4), and

(b) section 416ZE,

which provide for D to be calculated differently in certain
circumstances.

(4) 15The following provisions apply in relation to an amount restricted
under subsection (1) as they apply in relation to an amount restricted
under section 165B(1)—

(a) section 165C;

(b) section 165E, subject to the modifications in subsection (5).

(5) 20The modifications are that—

(a) the references to Part 2 are to be read as references to this Part,

(b) in subsection (1)(c), the reference to decommissioning
expenditure is to be read as a reference to qualifying
expenditure under section 416ZA, and

(c) 25in subsection (5), the reference to R’s available qualifying
expenditure is to be read as a reference to R’s qualifying
expenditure on the restoration of the site.

(6) But if, under the arrangement, a particular service or part of a service
is provided by more than one person who is connected with R (so
30that without this subsection there would be more than one amount
for D in relation to that service or part), D is the lowest of those
amounts.

416ZE Allowance where site restoration undertaken for other participators
in oil field

(1) 35This section applies where—

(a) S carries out the restoration of a relevant site,

(b) there are, in addition to R, one or more other participators in
the relevant field, and

(c) the expenditure incurred in carrying out the restoration is
40apportioned between the participators (including R) in
accordance with their shares in the oil won from the relevant
field or their shares in the equity of that field.

(2) D is the part of the expenditure referred to in subsection (1)(c) which
is incurred by R.

(3) 45Where—

(a) a relevant site has been used in connection with the winning
of oil from more than one relevant field, and

(b) the expenditure incurred in respect of the restoration is
apportioned between those fields in accordance with the
5contribution from each field to the total of the oil won using
that site,

subsections (1) and (2) apply to each such field as if subsection (1)(c)
referred to the expenditure apportioned to that field.

(4) But subsections (2) and (3) do not apply (and section 416ZD(2)
10applies instead) if—

(a) the amount of consideration, or the method of determining
the amount of consideration, to be received by S under the
arrangement or arrangements, or

(b) the apportionment of the liability for that consideration
15(whether between the participators as mentioned in
subsection (1)(c) or between the fields as mentioned in
subsection (3)(b)),

has been agreed as, or as part of, an avoidance scheme.

(5) A scheme is an “avoidance scheme” if the main purpose, or one of the
20main purposes, of a party in entering into the scheme is to enable a
person to obtain a tax advantage under this Part that would not
otherwise be obtained.

(6) The reference in subsection (5) to obtaining a tax advantage that
would not otherwise be obtained includes obtaining an allowance
25that is in any way more favourable to a person than the one that
would otherwise be obtained.

(7) In relation to the restoration of a relevant site, “relevant field” means
any of the following—

(a) the oil field in which the site is located;

(b) 30if the site is the site of a source to the working of which a ring
fence trade relates (or related), an oil field from which oil is or
has been won by means of working the source;

(c) if the site is land used in connection with working such a
source, an oil field from which oil is or has been won by
35means of working the source.

(8) In this section—

• “licensee”, “oil” and “oil field” have the same meaning as in Part
  1 of OTA 1975, and

• “other participator” means a person, not connected with R, who
  40is a licensee in respect of any licensed area wholly or partly
  included in the oil field in question.”

10 In section 395(3) of that Act (provisions limiting “qualifying expenditure”)
for “Chapter 4 contains” substitute “Chapters 4 and 5 contain”.

11 The amendments made by this Part have effect in relation to expenditure
45incurred on restoration carried out on or after the day on which this Act is
passed.

Part 3 Amendments of TIOPA 2010

12 Part 4 of TIOPA 2010 (transfer pricing) is amended as follows.

13 In section 147(6) (list of exceptions to the basic rule stated in that section),
5after paragraph (b) insert—

“(ba) section 206A (modification of basic rule where allowances
restricted for certain oil-related expenditure),”.

14 After section 206 insert—

“206A Modification of basic rule where allowances restricted for certain
10expenditure

(1) This section applies where—

(a) in a case to which section 165A(1) of CAA 2001 (restriction of
allowances for decommissioning expenditure) applies, R’s
available qualifying expenditure is restricted under section
15165B(2) or 165C of that Act, or

(b) in a case to which section 416ZC(1) of that Act (restriction of
allowances for expenditure on site restoration) applies, R’s
qualifying expenditure is restricted under section 416ZD(2)
or section 165C as applied by section 416ZD(4)(a) of that Act.

(2) 20In calculating for tax purposes S’s profits and losses in relation to the
service provided by S to R, the amount which S is required to bring
into account is an amount equal to R’s expenditure (restricted as
mentioned in subsection (1)(a) or (b)).

(3) Section 147(3) and (5) do not apply to the extent that they are
25inconsistent with subsection (2).

(4) In this section “R” and “S” have the meaning given by section 165A
or 416ZC of CAA 2001 (as the case may be).”

15 In section 213 (effect of Part 4 on capital allowances), after subsection (2)
insert—

“(3) 30But a claim under section 174 may not be made if the claim would
affect the operation of sections 165A to 165E or 416ZC to 416ZE of
CAA 2001.”

16 The amendments made by this Part have effect for accounting periods
ending on or after the day on which this Act is passed.

Section 160

SCHEDULE 31 Annual tax on enveloped dwellings: returns, enquiries, assessments and
appeals

Part 1 5Returns

Contents of return

1 (1) The Commissioners for Her Majesty’s Revenue and Customs may by
regulations make provision about—

(a) the form and content of a return;

(b) 10the method of delivering a return.

(2) Regulations under sub-paragraph (1) may make different provision for
different purposes.

(3) Every return must include a declaration by the person making it to the effect
that the return is correct and complete to the best of the person’s knowledge.

(4) 15A return is treated as containing any information provided by the person
making the return for the purpose of completing the return.

2 References in this Part of this Act to the delivery of an annual tax on
enveloped dwellings return are to the delivery of a return that complies with
all requirements imposed by or under any of sections 157, 158 and 158 and
20paragraph 1.

Amendment of return by chargeable person

3 (1) A person who has delivered a return may amend the return by notice to an
officer of Revenue and Customs.

(2) The Commissioners for Her Majesty’s Revenue and Customs may require
25that notices under this paragraph—

(a) are in a specified form, or

(b) contain specified information.

(3) An amendment under this paragraph must be made by the end of the next
chargeable period after the chargeable period to which the return relates
30(but see the exception that follows).

(4) If a return is delivered on or after 1 January in the chargeable period next
after that to which it relates, the latest time for amending the return under
this paragraph is the end of the period of 3 months after the day on which
the return is delivered.

35Correction of return by HMRC

4 (1) An officer of Revenue and Customs may correct any obvious error or
omission in a return.

(2) A correction under this paragraph—

(a) is made by notice to the chargeable person, and

(b) 40is regarded as effecting an amendment of the return.

(3) The reference in sub-paragraph (1) to an error includes, for instance, an
arithmetical mistake or an error of principle.

(4) A correction under this paragraph must be made within the 9 months
beginning with—

(a) 5the day on which the return was delivered, or

(b) if the correction is needed as a result of an amendment under
paragraph 3, the day on which the amendment was made.

(5) A correction under this paragraph has no effect if the chargeable person—

(a) amends the return so as to reject the correction, or

(b) 10gives a notice rejecting the correction in the special period mentioned
in sub-paragraph (6).

(6) A notice is given in the “special period” if it is given—

(a) after the end of the period within which the chargeable person may
amend the return, but

(b) 15before the end of the 3 months beginning with the date of issue of the
notice of correction.

(7) A notice under sub-paragraph (5)(b) must be given to HMRC.

Part 2 Duty to keep and preserve records

20Duty to keep and preserve records

5 (1) A person who is required to deliver a return for a chargeable period must—

(a) keep any records that may be needed to enable the person to deliver
a correct and complete return, and

(b) preserve those records in accordance with this paragraph.

(2) 25The records must be preserved until the end of the later of the relevant day
and the date on which—

(a) an enquiry into the return is completed, or

(b) if there is no enquiry, an officer of Revenue and Customs no longer
has power to enquire into the return.

(3) 30“The relevant day” means—

(a) the sixth anniversary of the last day of the chargeable period, or

(b) any earlier day that may be specified in writing by the
Commissioners for Her Majesty’s Revenue and Customs.

(4) Different days may be specified for different purposes under sub-paragraph
35(3)(b).

(5) The records required to be kept and preserved under this paragraph
include—

(a) details of any relevant transaction (including any contract or
conveyance and any supporting maps, plans or similar documents
40and records of relevant payments, receipts and financial
arrangements);

(b) records of any valuation of the single-dwelling interest relevant to its
value on any day in the chargeable period.

(6) The Commissioners for Her Majesty’s Revenue and Customs may by
regulations—

(a) provide that the records required to be kept under this paragraph do,
or do not, include records specified in the regulations;

(b) 5specify supporting documents that are required to be kept under this
paragraph.

(7) Regulations under this paragraph may make provision by reference to
things specified in a notice published by the Commissioners for Her
Majesty’s Revenue and Customs in accordance with the regulations (and not
10withdrawn by a subsequent notice).

(8) “Supporting documents” includes accounts, books, deeds, contracts,
vouchers and receipts.

Preservation of information etc

6 The duty under paragraph 5 to preserve records may be satisfied—

(a) 15by preserving them in any form and by any means, or

(b) by preserving the information contained in them in any form and by
any means, subject to any conditions or exceptions specified in
writing by the Commissioners for Her Majesty’s Revenue and
Customs.

20Penalty for failure to keep and preserve records

7 (1) A person who fails to comply with paragraph 5 in relation to a chargeable
period is liable to a penalty not exceeding £3,000, subject to the following
exception.

(2) No penalty is incurred if an officer of Revenue and Customs is satisfied that
25any facts that it is reasonable to require should be proved to HMRC, and that
would have been proved by the records, are proved by other documentary
evidence provided to them.

Part 3 Enquiry into return

30Notice of enquiry

8 (1) An officer of Revenue and Customs may enquire into a return if sub-
paragraph (2) has been complied with.

(2) Notice of the intention to make an enquiry must be given—

(a) to the person by whom or on whose behalf the return was delivered
35(“the relevant person”);

(b) before the end of the period of 12 months after the relevant date.

(3) The relevant date is—

(a) the filing date, if the return was delivered on or before that date;

(b) the date on which the return was delivered, if the return was
40delivered after the filing date;