Finance Bill

Session 2013 - 14
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Finance Bill

Finance 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.
20
(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,
25
“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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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
20
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
25
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

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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—

where—
10
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.

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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
40
purposes of the ring fence trade.
(1D)
Plant or machinery is “incidentally-acquired redundant plant or
machinery” if—

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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”;
35
(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
40
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”.

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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,

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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—
45
(i)
begins with the day following the last day of a period
determined under paragraph (a) or this paragraph, and