Finance Bill

House of Commons

Session 2007 - 08
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Finance Bill

Finance Bill
Part 6 — Oil
61

“relevant oil field” means the oil field to which the
abandonment expenditure relates;
“sum in default” means the amount of the payment which the
defaulter is liable to make as mentioned in paragraph
2A(1)(a), less the aggregate of—
5
(a)
so much of that payment as has been made by the
defaulter, and
(b)
so much of that payment as has been met by virtue of
any guarantee or security provided in respect of the
defaulter’s liability.
10
      (3)
For the purposes of paragraph 2A, a current participator is to be
regarded as defaulting on a liability to make a payment towards
abandonment expenditure if the following conditions are met.
      (4)
The first condition is that the current participator has failed to make
the payment in full on the due day.
15
      (5)
The second condition is that—
(a)
any of the payment remains unpaid on the sixtieth day after
the due day, or
(b)
before that sixtieth day, the current participator’s interest in
a relevant licence becomes liable under the relevant
20
agreement to be sold or forfeited, in whole or in part, by
reason of the failure to meet the liability.
      (6)
In sub-paragraphs (4) and (5) “due day” means the day on which the
payment towards abandonment expenditure becomes due under the
relevant agreement or the abandonment programme.”
25
(2)
The amendment made by subsection (1) has effect in relation to expenditure
incurred after 30 June 2008.
100
Abandonment expenditure: former participator reimbursed by defaulter
(1)
Section 108 of FA 1991 (reimbursement by defaulter in respect of certain
abandonment expenditure) is amended as follows.
30
(2)
In subsection (1)(a), omit “(as set out in section 107 above)”.
(3)
For subsection (1)(b) substitute—
“(b)
an amount is attributed to a contributing participator under
paragraph 2A(2) of Schedule 5 to the principal Act; and”.
(4)
In subsection (1)(c), for “qualifying participator” substitute “contributing
35
participator”.
(5)
In subsection (4), for “qualifying participator” (in each place) substitute
“contributing participator”.
(6)
In subsection (5), for “qualifying participator” substitute “contributing
participator”.
40
(7)
In subsection (7), for “qualifying participator” substitute “contributing
participator”.
(8)
The amendments made by this section have effect in relation to expenditure
incurred after 30 June 2008.

Finance Bill
Part 6 — Oil
62

101
Returns of relevant sales of oil
(1)
Section 62 of FA 1987 (returns of relevant sales of oil) is amended as follows.
(2)
After subsection (3) insert—
“(3A)
Subsection (4) applies to a participator in an oil field in any case
where—
5
(a)
paragraph 2 of Schedule 2 to the principal Act requires the
participator to make a return for any chargeable period
(including cases where the latest time for the delivery of that
return is deferred), and
(b)
there are any relevant sales of Category 2 oil (as defined in
10
subsection (6) below).”
(3)
In subsection (4), for the words before paragraph (a) substitute—
“(4)
In such a case, that participator shall also be required, not later than the
end of the second month after the end of that chargeable period, to
deliver to the Board a return of all relevant sales of Category 2 oil
15
stating—”.
(4)
In subsection (4), in paragraphs (d), (e) and (f), for “oil” (in each place)
substitute “Category 2 oil”.
(5)
In subsection (6)—
(a)
in the words before paragraph (a), for “oil”, in each place except in the
20
expression “oil field”, substitute “Category 2 oil”,
(b)
in paragraph (a), for “subsection (4)” substitute “subsection (3A)”,
(c)
in paragraph (c), for “oil” substitute “Category 2 oil”, and
(d)
omit paragraph (d) and the “and” before it.
(6)
After subsection (8) insert—
25
“(8A)
For provision about the meaning of “Category 2 oil”, see paragraph 2 of
Schedule 3 to the principal Act (which applies by virtue of section 72(6)
below).”
(7)
The amendments made by this section have effect in relation to chargeable
periods ending on or after 30 June 2008.
30
102
Elections for oil fields to become non-taxable
(1)
Section 185 of FA 1993 is amended as follows.
(2)
Before subsection (1) insert—
“(A1)
In this Part of this Act—
“non-taxable oil field” means an oil field which meets the
35
conditions in subsection (1), (1ZA) or (1A), and
“taxable oil field” means an oil field which is not a non-taxable
field.”
(3)
In subsection (1)—
(a)
for the words before paragraph (a) substitute—
40

“An oil field meets the conditions in this subsection if it is an oil
field—”, and

Finance Bill
Part 6 — Oil
63

(b)
omit the words after paragraph (b).
(4)
After that subsection insert—
“(1ZA)
An oil field meets the conditions in this subsection if—
(a)
the field does not meet the conditions in subsection (1), and
(b)
an election under Schedule 20A that the field is to be non-
5
taxable is in effect.”
(5)
In subsection (1A), before paragraph (a) insert—
“(za)
the field does not meet the conditions in subsection (1),”.
(6)
Before Schedule 21 to FA 1993, insert Schedule 20A that is set out in Part 1 of
Schedule 33 to this Act.
10
(7)
Part 2 of Schedule 33 contains other amendments relating to the amendments
made by this section.
Corporation tax
103
Capital allowances: plant and machinery for use in ring fence trade
(1)
In section 52(3) of CAA 2001 (amount of first-year allowances), for the two
15
entries in the table relating to section 45F substitute—

“Expenditure qualifying under section 45F (expenditure for
100%”.

use wholly in a ring fence trade)

(2)
The amendment made by subsection (1) has effect in relation to expenditure
incurred on or after 12 March 2008.
20
104
Capital allowances: decommissioning expenditure
(1)
Section 163 of CAA 2001 (meaning of “abandonment expenditure”) is amended
as follows.
(2)
For the heading substitute “Meaning of “general decommissioning
expenditure””.
25
(3)
For subsections (1) to (3) substitute—
“(1)
Expenditure is “general decommissioning expenditure” for the
purposes of sections 164 and 165 if the conditions in subsections (3) and
(4) are met.
(2)
But that is subject to subsections (4ZA) to (4ZC).
30
(3)
The expenditure must have been incurred on decommissioning plant
or machinery—
(a)
which has been brought into use for the purposes of a ring fence
trade, and
(b)
which—
35
(i)
is, or forms part of, an offshore installation or a
submarine pipeline, or
(ii)
when last in use for the purposes of a ring fence trade,
was, or formed part of, such an installation or pipeline.”

Finance Bill
Part 6 — Oil
64

(4)
After subsection (4) insert—
“(4ZA)
An amount of general decommissioning expenditure determined in
accordance with subsection (1) is to be reduced under subsection (4ZB)
if it appears that the decommissioned plant and machinery—
(a)
was brought into use partly for the purposes of the ring fence
5
trade and partly for the purposes of another trade, or
(b)
was brought into use wholly for the purposes of the ring fence
trade, but has, at any time since, not been used wholly for those
purposes.
(4ZB)
The amount determined in accordance with subsection (1) is to be
10
reduced to an amount which is just and reasonable having regard to the
relevant circumstances.
(4ZC)
The relevant circumstances include, in particular, the extent to which
the decommissioned plant and machinery has not been used for the
purposes of the ring fence trade.”
15
(5)
In subsection (5)(b), omit ““abandonment programme”,”.
(6)
Schedule 34 contains amendments consequential on this section.
(7)
The amendments made by this section and that Schedule have effect in relation
to expenditure incurred on or after 12 March 2008.
105
Capital allowances: abandonment expenditure after ceasing ring fence trade
20
(1)
Section 165 of CAA 2001 (abandonment expenditure within 3 years of ceasing
ring fence trade) is amended as follows.
(2)
In the heading, for “within 3 years of” substitute “after”.
(3)
For subsection (2) substitute—
“(2)
“The post-cessation period” means the period that—
25
(a)
begins with the day following the last day on which the former
trader carried on the ring fence trade, and
(b)
ends with the day on which condition A and condition B are
both met (or, if they are met on different days, the later of those
days).
30
(2A)
Condition A is met if each approved abandonment programme that
relates wholly or partly to relevant plant and machinery has ceased to
have effect.
(2B)
Condition B is met if the Secretary of State is satisfied that no other
abandonment programmes that relate wholly or partly to relevant
35
plant and machinery will be approved.
(2C)
For the purposes of condition A, an approved abandonment
programme ceases to have effect if and when—
(a)
the programme has been carried out to the satisfaction of the
Secretary of State, or
40
(b)
approval of the programme has been withdrawn.”

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Part 6 — Oil
65

(4)
After subsection (4) insert—
“(4A)
Abandonment expenditure is to be disregarded for the purposes of this
section if the expenditure is incurred in decommissioning plant and
machinery at a time—
(a)
after an abandonment programme relating wholly or partly to
5
the plant and machinery has had its approval withdrawn, and
(b)
when no other abandonment programme relating wholly or
partly to the plant and machinery is approved.”
(5)
After subsection (5) insert—
“(6)
For the purposes of this section, it does not matter if approval of an
10
abandonment programme that relates to relevant plant and machinery
(including approval of the first such programme) is given before or
after the start of the post-cessation period.
(7)
In this section—
“abandonment programme” means an abandonment programme
15
under Part 4 of the Petroleum Act 1998;
“approved”, in relation to an abandonment programme, means
approved or revised under Part 4 of the Petroleum Act 1998
(and “approval” is to be construed accordingly);
“relevant plant and machinery” means plant and machinery—
20
(a)
which has been brought into use for the purposes of the
ring fence trade that has ceased, and
(b)
which, when last in use for the purposes of that ring
fence trade, was, or formed part of, an offshore
installation or submarine pipeline;
25
and for this purpose “offshore installation” and “submarine
pipeline” have the same meaning as in Part 4 of the Petroleum
Act 1998;
“withdrawn”, in relation to approval of an abandonment
programme, means withdrawn under Part 4 of the Petroleum
30
Act 1998.”
(6)
Section 393A of ICTA (losses: set off against profits of the same, or an earlier,
accounting period) is amended as follows.
(7)
In subsection (11)—
(a)
for “In any case where” substitute “Subsection (11A) applies in any case
35
where”,
(b)
in paragraph (a), for “within 3 years of” substitute “after”, and
(c)
omit the words after paragraph (b).
(8)
After that subsection insert—
“(11A)
In relation to any claim under subsection (1)—
40
(a)
to the extent that the claim relates to an increase falling within
subsection (11)(a), this section shall have effect as if—
(i)
in subsection (10), “the relevant period” were
substituted for “the period of two years”, and
(ii)
after subsection (10), there were inserted—
45

Finance Bill
Part 6 — Oil
66

“(10ZA)
In subsection (10), “relevant period” means

the period calculated by adding two years to

the post-cessation period (within the

meaning of section 165 of the Capital

Allowances Act).”;

5
(b)
to the extent that the claim relates to expenditure falling within
subsection (11)(b), subsection (10) shall have effect with the
substitution of “five years” for “two years”.”
(9)
The amendments made by this section have effect in relation to ring fence
trades that cease to be carried on or after 12 March 2008.
10
106
Losses: set off against profits of earlier accounting periods
(1)
In ICTA, after section 393A insert—
“393B
  Losses of ring fence trade: set off against profits of an earlier
accounting period
(1)
This section applies if these conditions are met—
15
(a)
a company makes a claim under section 393A(1) requiring that
a loss incurred in a ring fence trade be set off against profits;
(b)
section 393A(2A) applies in relation to that claim (three year set
off period) by virtue of—
(i)
section 393A(2B) (loss precedes cessation of trade), or
20
(ii)
section 393A(2C) (loss arises in year when general
decommissioning expenditure incurred); and—
(c)
the loss incurred in the ring fence trade that may be set off under
section 393A (“L”) exceeds the profits against which L may be
set off under section 393A (“P”).
25
(2)
The profits of the ring fence trade of an accounting period are to be
relieved under subsection (3) if that period—
(a)
falls wholly or partly before the three year set off period, and
(b)
ends on or after 17 April 2002.
(3)
Subject to any relief for an earlier loss, those profits of that accounting
30
period shall be treated as reduced by—
(a)
the amount by which L exceeds P, or
(b)
so much of that amount as cannot be relieved under this
subsection against profits of the ring fence trade of a later
accounting period.
35
(4)
Subsection (3) is subject to subsection (5) in the case of an accounting
period that falls partly (but not wholly) before the three year set off
period.
(5)
The amount of the reduction of the profits of the ring fence trade that
may be made under subsection (3) shall not exceed a part of those
40
profits proportionate to the part of the accounting period that falls
before the three year set off period.
(6)
Subsection (3) is subject to subsection (7) in the case of an accounting
period that begins before 17 April 2002 and ends on or after that date.

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Part 6 — Oil
67

(7)
The amount of the reduction of the profits of the ring fence trade that
may be made under subsection (3) shall not exceed a part of those
profits proportionate to the part of the accounting period that falls after
16 April 2002.
(8)
In this section—
5
“ring fence” has the same meaning as in section 162 of the Capital
Allowances Act;
“three year set off period” means the period of three years that
applies to the claim under section 393A(1) by virtue of section
393A(2A) and section 393A(2B) or (2C).”
10
(2)
Schedule 35 contains minor and consequential amendments relating to the
amendments made by this section.
(3)
The amendments made by this section and that Schedule have effect in relation
to losses incurred in accounting periods beginning on or after 12 March 2008.
107
Ring fence trade: no deduction for expenses of investment management
15
(1)
In section 492 of ICTA (treatment of oil extraction activities etc for tax
purposes), after subsection (3) insert—
“(3A)
No deduction under section 75 (expenses of management of investment
business) shall be allowed from a company’s ring fence profits.”
(2)
The amendment made by subsection (1) has effect in relation to expenses
20
referable to accounting periods ending on or after 12 March 2008 (but see also
subsections (3) and (4)).
(3)
In the case of expenses referable to a straddling period, a deduction of the
relevant fraction of those expenses shall be allowed under section 75 of ICTA
from the company’s ring fence profits.
25
(4)
But the deduction allowed under subsection (3) may not exceed the total
amount of the expenses referable to the straddling period that have actually
been paid—
(a)
during the first portion of the straddling period, or
(b)
before the start of the straddling period.
30
(5)
In this section—
“first portion”, in relation to a straddling period, means the portion
which—
(a)
begins with the first day of the straddling period, and
(b)
ends with 11 March 2008,
35
“relevant fraction” means—
where—

P is the number of days in the first portion of the straddling
period, and

T is the total number of days in the straddling period, and
40
“straddling period” means an accounting period beginning before 12
March 2008 and ending on or after that date.