Finance Bill

Session 2013 - 14
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Finance Bill

Finance Bill
Schedule 29 — Miscellaneous amendments relating to decommissioning
Part 1 — Abandonment guarantees and abandonment expenditure
379

Schedule 29
Section 86

Miscellaneous amendments relating to decommissioning
Part 1
Abandonment guarantees and abandonment expenditure
Expenditure on abandonment guarantees
5
1     (1)
In Part 2 of ITTOIA 2005 (trading income), Chapter 16A (oil activities) is
amended as follows.
      (2)
In section 225N (expenditure on and under abandonment guarantees)—
(a)
after subsection (1) insert—
“(1A)
Subsection (2) also applies if expenditure incurred by a
10
participator in an oil field would be so allowable as a result of
section 3(1)(hh) of that Act but for the fact that the oil field is
a non-taxable oil field within the meaning of Part 3 of FA 1993
(see section 185 of that Act).”;
(b)
in subsection (2), for “that expenditure is so allowable” substitute
15
“the expenditure mentioned in subsection (1) or (1A) is or would be
so allowable”.
      (3)
In section 225R (introduction to sections 225S and 225T)—
(a)
in paragraph (a) of subsection (1), omit the words from “, or would
apply” to “made”;
20
(b)
in paragraph (b) of that subsection, after “Schedule” insert “, or
would fall to be so attributed if a claim under paragraph 2A(2) of that
Schedule were made”;
(c)
after subsection (1) insert—
“(1A)
The condition in subsection (1)(b) is to be treated as met for
25
the purposes of this section if it would be met but for the fact
that the contributing participator is (or was) a participator in
an oil field that is a non-taxable oil field within the meaning
of Part 3 of FA 1993 (see section 185 of that Act).”;
(d)
in subsection (2), before “attributed” insert “or would be”.
30
2     (1)
In Part 8 of CTA 2010 (oil activities), Chapter 4 (calculation of profits) is
amended as follows.
      (2)
In section 292 (expenditure on and under abandonment guarantees)—
(a)
after subsection (1) insert—
“(1A)
Subsection (2) also applies if expenditure incurred by a
35
participator in an oil field would be so allowable as a result of
section 3(1)(hh) of that Act but for the fact that the oil field is
a non-taxable oil field within the meaning of Part 3 of FA 1993
(see section 185 of that Act).”;
(b)
in subsection (2), for “that expenditure is so allowable” substitute
40
“the expenditure mentioned in subsection (1) or (1A) is or would be
so allowable”.
      (3)
In section 296 (introduction to sections 297 and 298)—

Finance Bill
Schedule 29 — Miscellaneous amendments relating to decommissioning
Part 1 — Abandonment guarantees and abandonment expenditure
380

(a)
in paragraph (a) of subsection (1), omit the words from “, or would
apply” to “made”;
(b)
in paragraph (b) of that subsection, after “Schedule” insert “, or
would fall to be so attributed if a claim under paragraph 2A(2) of that
Schedule were made”;
5
(c)
after subsection (1) insert—
“(1A)
The condition in subsection (1)(b) is to be treated as met for
the purposes of this section if it would be met but for the fact
that the contributing participator is (or was) a participator in
an oil field that is a non-taxable oil field within the meaning
10
of Part 3 of FA 1993 (see section 185 of that Act).”;
(d)
in subsection (2), before “attributed” insert “or would be”.
Expenditure under abandonment guarantees
3
In Schedule 3 to OTA 1975 (petroleum revenue tax: miscellaneous
provisions), in paragraph 8 (certain subsidised expenditure to be
15
disregarded), after sub-paragraph (1) insert—
   “(1A)
But sub-paragraph (1) above does not apply to any expenditure
for which the relevant participator is liable that has been or is to be
met directly or indirectly out of a payment made by the guarantor
under an abandonment guarantee.
20
     (1B)
In sub-paragraph (1A) above—
“abandonment guarantee” has the same meaning as it has for
the purposes of section 3 of this Act (see section 104 of the
Finance Act 1991), and
“the guarantor” and “the relevant participator” have the
25
same meaning as in section 104 of that Act.”
4
In Schedule 5 to OTA 1975 (allowance of expenditure), in paragraph 2C(2),
in the definition of “sum in default”, for the words from “less the aggregate
of” to the end substitute “less so much of that payment as has been made by
the defaulter”.
30
5     (1)
Part 3 of FA 1991 (oil taxation) is amended as follows.
      (2)
Omit section 105 (restriction of expenditure relief by reference to payments
under abandonment guarantees).
      (3)
Omit section 106 (relief for reimbursement expenditure under abandonment
guarantees).
35
6     (1)
In Part 2 of ITTOIA 2005 (trading income), Chapter 16A (oil activities) is
amended as follows.
      (2)
In section 225N (expenditure on and under abandonment guarantees), omit
subsections (3) and (4).
      (3)
Omit section 225O (relief for reimbursement expenditure under
40
abandonment guarantees).
7     (1)
In Part 8 of CTA 2010 (oil activities), Chapter 4 (calculation of profits) is
amended as follows.

Finance Bill
Schedule 29 — Miscellaneous amendments relating to decommissioning
Part 1 — Abandonment guarantees and abandonment expenditure
381

      (2)
In section 292 (expenditure on and under abandonment guarantees), omit
subsections (3) and (4).
      (3)
Omit section 293 (relief for reimbursement expenditure under abandonment
guarantees).
Reimbursement by defaulter in respect of abandonment expenditure
5
8
In Part 3 of FA 1991, omit section 108 (reimbursement by defaulter in respect
of certain abandonment expenditure).
9
In Part 2 of ITTOIA 2005, omit section 225T (reimbursement by defaulter in
respect of certain abandonment expenditure).
10
In Part 8 of CTA 2010, omit section 298 (reimbursement by defaulter in
10
respect of certain abandonment expenditure).
Consequential amendments
11    (1)
Section 104 of FA 1991 is amended as follows.
      (2)
In subsection (1), omit “and sections 105 and 106 below”.
      (3)
In subsection (2), omit “and section 106 (but not section 105) below”.
15
12
In FA 2008, omit section 105.
13
In Part 2 of ITTOIA 2005, Chapter 16A is amended as follows.
14    (1)
Section 225N is amended as follows.
      (2)
Omit subsection (5).
      (3)
In subsection (6), in the definition of “abandonment guarantee”—
20
(a)
for “section 105 of FA 1991” substitute “section 3 of OTA 1975”, and
(b)
for “that Act” substitute “FA 1991”.
      (4)
The heading of that section becomes “Expenditure on abandonment
guarantees”.
15
Omit sections 225P and 225Q.
25
16
In section 225R (introduction to sections 225S and 225T)—
(a)
in subsection (1), for “Sections 225S and 225T apply” substitute
“Section 225S applies”;
(b)
the heading of section 225R becomes “Introduction to section 225S”.
17
In Part 8 of CTA 2010, Chapter 4 is amended as follows.
30
18    (1)
Section 292 is amended as follows.
      (2)
Omit subsection (5).
      (3)
In subsection (6), in the definition of “abandonment guarantee”—
(a)
for “section 105 of FA 1991” substitute “section 3 of OTA 1975”, and
(b)
for “that Act” substitute “FA 1991”.
35
      (4)
The heading of that section becomes “Expenditure on abandonment
guarantees”.

Finance Bill
Schedule 29 — Miscellaneous amendments relating to decommissioning
Part 2 — Receipts arising from decommissioning
382

19
Omit sections 294 and 295.
20
In section 296 (introduction to sections 297 and 298)—
(a)
in subsection (1), for “Sections 297 and 298 apply” substitute “Section
297 applies”;
(b)
the heading of section 296 becomes “Introduction to section 297”.
5
Part 2
Receipts arising from decommissioning
Calculation of profits chargeable to corporation tax and supplementary charge
21
In Chapter 4 of Part 8 of CTA 2010 (oil activities: calculation of profits), after
section 298 insert—
10
“Receipts arising from decommissioning
298A
Receipts arising from decommissioning
(1)
This section applies if—
(a)
a company that is or has been carrying on a ring fence trade
(“the defaulter”) has defaulted on a liability under—
15
(i)
a relevant agreement, or
(ii)
an abandonment programme,

to make a payment towards decommissioning expenditure,
(b)
another company that is or has been carrying on a ring fence
trade (“the contributing company”) pays an amount (“the
20
relevant contribution”) in or towards meeting the whole or
part of the default, and
(c)
the amount of the relevant contribution is less than the sum
of the amounts within subsection (2).
(2)
The amounts within this subsection are—
25
(a)
any payments made (directly or indirectly) to the
contributing company by the guarantor under an
abandonment guarantee as a result of the defaulter
defaulting on the liability,
(b)
any reimbursement payments, and
30
(c)
any relief from tax which the contributing company obtains
in respect of the relevant contribution.
(3)
The difference between—
(a)
the sum of the amounts within subsection (2), and
(b)
the relevant contribution,
35

(“the relevant difference”) is to be treated as a receipt (in the nature
of income) of the contributing company’s ring fence trade for the
relevant accounting period (see subsection (4)).
(4)
“The relevant accounting period” means the accounting period that
includes the day on which the Secretary of State certifies that the
40
relevant abandonment programme has been satisfactorily completed
(“the certification date”).

This is subject to subsections (5) and (6).

Finance Bill
Schedule 29 — Miscellaneous amendments relating to decommissioning
Part 2 — Receipts arising from decommissioning
383

(5)
If the contributing company has ceased to carry on the ring fence
trade before the certification date, “the relevant accounting period”
is the last accounting period of the trade.
(6)
If the contributing company has ceased to be within the charge to
corporation tax in respect of the ring fence trade before the
5
certification date, “the relevant accounting period” is the accounting
period during or at the end of which the contributing company
ceased to be within the charge to corporation tax in respect of the
trade.
(7)
The relevant difference is to be determined—
10
(a)
in a case where subsection (5) or (6) applies, at the end of the
calendar year in which the certification date falls, and
(b)
in any other case, at the end of the relevant accounting
period.
(8)
In a case where subsection (5) or (6) applies, any corporation tax
15
chargeable for the relevant accounting period by virtue of this
section is due and payable as if it were corporation tax for an
accounting period beginning with the certification date.
(9)
Any additional assessment to corporation tax required in order to
take account of a receipt arising under this section may be made at
20
any time not later than 4 years after the end of the calendar year in
which the certification date falls.
(10)
In this section—
“abandonment programme” means an abandonment
programme approved under Part 4 of the Petroleum Act 1998
25
(including such a programme as revised),
“decommissioning expenditure” has the meaning given by
section 330C,
“reimbursement payment” means any payment made to the
contributing company by the defaulter in reimbursing the
30
contributing company in respect of, or otherwise making
good to the contributing company, the whole or any part of
the relevant contribution,
“the relevant abandonment programme” means the
abandonment programme in respect of which the
35
decommissioning expenditure mentioned in subsection
(1)(a) was incurred, and
“relevant agreement” has the meaning given by section
104(5)(a) of FA 1991.”
Calculation of profits chargeable to income tax
40
22
In Chapter 16A of Part 2 of ITTOIA 2005 (trading income: oil activities), after
section 225U insert—
“Receipts arising from decommissioning
225V
Receipts arising from decommissioning
(1)
This section applies if—
45

Finance Bill
Schedule 29 — Miscellaneous amendments relating to decommissioning
Part 2 — Receipts arising from decommissioning
384

(a)
a person that is or has been carrying on a ring fence trade
(“the defaulter”) has defaulted on a liability under—
(i)
a relevant agreement, or
(ii)
an abandonment programme,

to make a payment towards decommissioning expenditure,
5
(b)
another person that is or has been carrying on a ring fence
trade (“the contributing person”) pays an amount (“the
relevant contribution”) in or towards meeting the whole or
part of the default, and
(c)
the amount of the relevant contribution is less than the sum
10
of the amounts within subsection (2).
(2)
The amounts within this subsection are—
(a)
any payments made (directly or indirectly) to the
contributing person by the guarantor under an abandonment
guarantee as a result of the defaulter defaulting on the
15
liability,
(b)
any reimbursement payments, and
(c)
any relief from tax which the contributing person obtains in
respect of the relevant contribution.
(3)
The difference between—
20
(a)
the sum of the amounts within subsection (2), and
(b)
the relevant contribution,

(“the relevant difference”) is to be treated as a receipt (in the nature
of income) of the contributing person’s ring fence trade for the
relevant tax year (see subsection (4)).
25
(4)
“The relevant tax year” means the tax year that includes the day on
which the Secretary of State certifies that the relevant abandonment
programme has been satisfactorily completed (“the certification
date”).

This is subject to subsection (5).
30
(5)
If the contributing person’s ring fence trade is permanently
discontinued before the certification date, “the relevant tax year” is
the last tax year in which that trade is carried on.
(6)
The relevant difference is to be determined—
(a)
in a case where subsection (5) applies, at the end of the tax
35
year in which the certification date falls, and
(b)
in any other case, at the end of the relevant tax year.
(7)
In a case where subsection (5) applies, any income tax chargeable for
the relevant tax year by virtue of this section is due and payable for
the tax year in which the certification date falls.
40
(8)
Any additional assessment to income tax required in order to take
account of a receipt arising under this section may be made at any
time not later than 4 years after the end of the tax year in which the
certification date falls.
(9)
In this section—
45

Finance Bill
Schedule 30 — Restrictions on allowances for certain oil-related expenditure
Part 1 — Decommissioning expenditure
385

“abandonment programme” means an abandonment
programme approved under Part 4 of the Petroleum Act 1998
(including such a programme as revised),
“decommissioning expenditure” has the meaning given by
section 330C of CTA 2010,
5
“reimbursement payment” means any payment made to the
contributing person by the defaulter in reimbursing the
contributing person in respect of, or otherwise making good
to the contributing person, the whole or any part of the
relevant contribution,
10
“the relevant abandonment programme” means the
abandonment programme in respect of which the
decommissioning expenditure mentioned in subsection
(1)(a) was incurred, and
“relevant agreement” has the meaning given by section
15
104(5)(a) of FA 1991.”
Part 3
Commencement
23
The amendments made by this Schedule have effect in relation to
expenditure incurred on or after the day on which this Act is passed.
20
Schedule 30
Section 90

Restrictions on allowances for certain oil-related expenditure
Part 1
Decommissioning expenditure
1
CAA 2001 is amended as follows.
25
2
After section 165 insert—
“Restrictions on allowances: anti-avoidance
165A
Decommissioning services supplied by connected person
(1)
Allowances under this Part are restricted under section 165B(1) if—
(a)
a person (“R”) who is carrying on, or has ceased to carry on,
30
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, and
(c)
all or part of the consideration for the service is
decommissioning expenditure.
35
(2)
Subsection (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.