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Finance (No. 2) BillPage 40

76 Close companies

Schedule 28 (which makes provision about close companies) has effect.

Part 2 Oil

5Decommissioning relief agreements

77 Decommissioning relief agreements

(1) There are to be paid out of money provided by Parliament any sums which a
Minister of the Crown is liable to pay under a decommissioning relief
agreement.

(2) 10A “decommissioning relief agreement” is an agreement which—

(a) is made between a Minister of the Crown and a qualifying company,
and

(b) provides that, in such circumstances as are specified in the agreement,
if the amount of tax relief in respect of any decommissioning
15expenditure incurred by that or another qualifying company is less
than an amount determined in accordance with the agreement (“the
reference amount”), the difference is payable to the company that
incurred the expenditure.

(3) “Qualifying company” means—

(a) 20any company that has at any time carried on a ring fence trade,

(b) any company that is associated with a company carrying on a ring fence
trade,

(c) any company that has at any time been associated with a company that
was carrying on a ring fence trade at that time, and

(d) 25in the case of decommissioning expenditure incurred in connection
with any plant or machinery, or any land, situated in the UK sector of a
cross-boundary field, any company that is a party to a joint operating
agreement or unitisation agreement in relation to that field.

(4) For the purposes of subsection (2)(b) the amount of tax relief in respect of any
30decommissioning expenditure is to be determined in accordance with the
agreement; and in making such a determination tax relief in respect of
expenditure incurred by the qualifying company that is not decommissioning
expenditure may, in such circumstances as are specified in the agreement, be
treated as if it were tax relief in respect of decommissioning expenditure.

(5) 35A payment made to a company under a decommissioning relief agreement is
not to be regarded as income or a gain of the company for any purpose of the
Tax Acts.

(6) Section 18(1) of CRCA 2005 (restriction on disclosure by Revenue and Customs
officials) does not prevent—

(a) 40disclosure to a Minister of the Crown for the purpose of enabling the
Minister of the Crown to determine the extent of any liability under a
decommissioning relief agreement, or

Finance (No. 2) BillPage 41

(b) disclosure to a company that has rights under a decommissioning relief
agreement for the purpose of enabling the company to determine the
reference amount.

(7) In this section—

(8) Subsections (8) to (9) of section 30 of the Petroleum Act 1998 (which specifies
when one body corporate is associated with another) apply for the purposes of
this section as they apply for the purposes of that section.

78 20Meaning of “decommissioning expenditure”

(1) In section 77 “decommissioning expenditure” means expenditure incurred in
connection with—

(a) demolishing any plant or machinery,

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

(c) 25preparing any plant or machinery for reuse,

(d) arranging for the reuse of any plant or machinery, or

(e) the restoration of any land.

(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) 30It is immaterial for the purposes of subsection (1)(c) and (d) whether the plant
or machinery is in fact reused.

(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.

(7) 35The power to make an order under subsection (5) is exercisable by statutory
instrument.

(8) A statutory instrument containing an order under subsection (5) is subject to
annulment in pursuance of a resolution of the House of Commons.

79 Annual report

(1) 40For each financial year the Treasury must prepare a report containing the
information in subsection (2).

(2) The information is—

Finance (No. 2) BillPage 42

(a) the number of decommissioning relief agreements entered into in that
year,

(b) the total number of decommissioning relief agreements in force at the
end of that year,

(c) 5the number of payments made under any decommissioning relief
agreements during that year, and the amount of each payment,

(d) the total number of payments that have been made under any
decommissioning relief agreements as at the end of that year, and the
total amount of those payments, and

(e) 10an estimate of the maximum amount liable to be paid under any
decommissioning relief agreements.

(3) The report for a financial year must be laid before the House of Commons as
soon as is reasonably practicable after the end of that year.

(4) In this section “decommissioning relief agreement” has the same meaning as in
15section 77.

(5) This section has effect in relation to financial years ending on or after 31 March
2014.

80 Effect of claim on PRT

(1) This section applies where a sum is payable to a company (“the claimant”)
20under a decommissioning relief agreement.

(2) Subsection (3) applies where the reference amount is calculated by reference to
what the claimant’s assessable profit in any chargeable period would be if any
expenditure incurred by it were used to reduce its profit in a particular way
(rather than in any way that it has in fact been used).

(3) 25For the purposes of petroleum revenue tax—

(a) the expenditure is treated as having been used to reduce the claimant’s
profit in that way (rather than in any way that it has in fact been used),
and

(b) the claimant is treated as if it had received the tax relief it would receive
30if its profit were reduced in that way (so no repayment of tax is to be
made by virtue of this subsection).

(4) Subsection (5) applies where the reference amount is calculated by reference to
what any other company’s assessable profit in any chargeable period would be
if any expenditure incurred by the claimant—

(a) 35had been incurred by the other company, and

(b) were used to reduce the other company’s profit in a particular way.

(5) For the purposes of petroleum revenue tax—

(a) the expenditure is treated as incurred by the other company (and not
the claimant),

(b) 40the expenditure is treated as having been used by the other company to
reduce its profit in that way, and

(c) the other company is treated as if it had received the tax relief it would
receive if its profit were reduced in that way (so no repayment of tax is
to be made by virtue of this subsection).

(6) 45In this section—

81 Terminal losses accruing by virtue of another’s default

(1) This section applies where—

(a) 10a company defaults on a liability under—

(i) a relevant agreement, or

(ii) an abandonment programme,

to make a payment towards decommissioning expenditure in respect
of an oil field,

(b) 15in consequence of the default, another company (“the other 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

(c) but for paragraph 15 of Schedule 17 to FA 1980 (terminal losses), a sum
20(or a sum of a greater amount) would be payable to the other company
under the decommissioning relief agreement.

(2) Paragraph 15 of Schedule 17 to FA 1980 does not apply in relation to any
allowable loss accruing to the other company from that oil field.

(3) Any allowable unrelievable field loss (within the meaning of section 6 of OTA
251975) that—

(a) consists of the unrelieved portion of an allowable loss within
subsection (2), and

(b) would (in the absence of this subsection) arise as a result of subsection
(2),

30is not to be regarded as arising.

(4) Nothing in this section affects the operation of section 80(3) or (5).

(5) In this section—

Finance (No. 2) BillPage 44

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) 5an abandonment programme,

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
10decommissioning expenditure in respect of that oil field, and

(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
15particular way.

(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
20section 8 of that Act is to be determined as if section 80 did not apply.

(3) In this section—

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
35interests in possession etc), section 58 (relevant property) is amended as
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;
40and.

(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
45under an abandonment programme.

Finance (No. 2) BillPage 45

(7) In subsection (6)—

(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,
10as a reference to Part 1 of the Petroleum Act 1987, and

(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
15virtue of the coming into force of this section.

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) 20No debits or credits are to be brought into account for the purposes of
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
25security settlement” if the sole or main purpose of the settlement is to
provide security for the performance of obligations under an
abandonment programme.

(3) In subsection (2)—

(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) 35The amendments made by this section have effect in relation to accounting
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
40for PRT purposes) is amended as follows.

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

Finance (No. 2) BillPage 46

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
5accounting period.

(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—


10

where—

  • RP is the relevant percentage of the decommissioning
    expenditure,

  • AF is the appropriate fraction, and

  • 15D is the PRT difference.

(4) In subsection (3)—

(a) before the definition of “the appropriate fraction” insert—

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

(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) 25In subsection (7)—

(a) omit the definition of “the relevant accounting period”, and

(b) at the end insert—

(7) The amendments made by this section have effect in relation to expenditure
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) 35Part 1 of Schedule 29 contains provision about expenditure on and under
abandonment guarantees and abandonment expenditure.

(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) BillPage 47

Capital allowances

87 Expenditure on decommissioning onshore installations

(1) Section 163 of CAA 2001 (meaning of “general decommissioning expenditure”)
is amended as follows.

(2) 5In subsection (1)—

(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) 10the conditions in subsections (3B) and (4) are met.

(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
15purposes of a ring fence trade, and

(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) 20In subsection (3B) “relevant onshore installation” means any building
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) 25is or has been used for purposes connected with the winning of
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
30Shelf Act 1964.

(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 35Expenditure on decommissioning certain redundant plant or machinery

(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
40purposes of this section as having been brought into use for the
purposes of the ring fence trade.

(1D) Plant or machinery is “incidentally-acquired redundant plant or
machinery” if—

Finance (No. 2) BillPage 48

(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
5fence trade,

(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
10relevant installation.

(1E) For the purposes of subsection (1D)—

(2) 20The amendment made by this section has effect in relation to expenditure
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) 25In section 395 (qualifying expenditure), in subsection (1)(d), omit “post-
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
30acquiring a mineral asset does not include expenditure incurred on the
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
35“relevant”;

(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) 40Relevant mineral extraction trade” means a mineral extraction
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) BillPage 49

(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
5fence trade incurs expenditure on the restoration of a relevant
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
10purposes the profits of any trade carried on by the person,

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) 15in the case of restoration work carried out while the person is
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 416ZB.

(3) 20The qualifying expenditure for a notional accounting period is treated
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
25is proportionate to that part of the restoration work (the “allowable
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
30qualifying expenditure for a subsequent relevant period.

(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
35tax purposes, and

(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) 40in relation to land in the United Kingdom, the carrying out of
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
45works required in order to comply with—

(i) an approved abandonment programme,

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