Capital Allowances Act 2001

165 [F1General decommissioning expenditure] [F2after] ceasing ring fence tradeU.K.

(1)This section applies if—

(a)a person (“the former trader”) has ceased to carry on a ring fence trade,

[F3(b)the decommissioning condition is met in relation to a notional accounting period, and]

(c)the [F4general decommissioning expenditure] is not otherwise deductible in calculating the income of the former trader for any tax purpose.

[F5(1A)The decommissioning condition is met in relation to a notional accounting period (the “relevant period”) if one or more of these paragraphs applies—

(a)the former trader incurs general decommissioning expenditure in the relevant period in respect of decommissioning carried out in that period,

(b)the former trader incurs general decommissioning expenditure in the relevant period in respect of decommissioning carried out in—

(i)a previous notional accounting period, or

(ii)a chargeable period falling before the first notional accounting period, and

(c)the former trader incurred general decommissioning expenditure in—

(i)a previous notional accounting period, or

(ii)a chargeable period falling before the first notional accounting period,

in respect of decommissioning that has not been carried out until the relevant period.

(1B)“Notional accounting period” means each of the following periods—

(a)the period that—

(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—

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

(ii)ends with the day on which the first termination event subsequently occurs;

but there are to be no notional accounting periods after the end of the post-cessation period.

(1C)“Termination event”, in relation to a notional accounting period, means each of the following—

(a)the end of the period of 12 months beginning with the first day of the notional accounting period,

(b)the occurrence of an accounting date of the former trader or, if there is a period for which the former trader does not make up accounts, the end of that period (but see subsections (6A) and (6B)), and

(c)the end of the post-cessation period.]

[F6(2)“The post-cessation period” means the period that—

(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).

(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 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

(b)approval of the programme has been withdrawn.]

(3)If this section applies [F7in relation to a notional accounting period]—

(a)an amount equal to the [F8relevant decommissioning cost] [F9for that period, or the aggregate of all the relevant decommissioning costs for that period,] is allocated to the appropriate pool for the chargeable period in which the former trader ceased to carry on the ring fence trade, and

(b)[F10where any of the [F11general decommissioning expenditure] was incurred on the demolition of plant or machinery,]any amount received within the post-cessation period for the remains of the plant or machinery does not constitute income of the former trader for any tax purpose.

[F12(3A)Subsection (3) is subject to sections 165A to 165E.]

(4)In subsection (3)—

• “the appropriate pool” means the pool to which the expenditure on the demolished plant or machinery has been allocated, and

• [F13“relevant decommissioning cost”, for a notional accounting period, means the amount by which general decommissioning expenditure falling within paragraph (a), (b) or (c) of subsection (1A) in relation to that period exceeds any amounts received before or during that period for the remains of any plant or machinery on whose demolition any of the general decommissioning expenditure was incurred.]

[F14(4A)[F15General decommissioning 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 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.]

[F16(4B)If an amount of general decommissioning expenditure is disproportionate to the relevant decommissioning carried out in the decommissioning period then, for the purposes of this section, only the allowable expenditure is to be taken to have been incurred in the expenditure period.

(4C)The application of subsection (4B) to an amount of general decommissioning expenditure does not prevent the non-allowable expenditure from being taken into account under this section in relation to a subsequent notional accounting period.

(4D)In subsections (4B) and (4C)—

• “allowable expenditure”, in relation to general decommissioning expenditure, means the amount of the expenditure that is proportionate to the relevant decommissioning carried out in the decommissioning period;

• “decommissioning period”, in relation to relevant decommissioning, means the notional accounting period or chargeable period in which the decommissioning was carried out;

• “expenditure period”, in relation to general decommissioning expenditure, means the notional accounting period or chargeable period in which the expenditure was incurred;

• “non-allowable expenditure”, in relation to general decommissioning expenditure, means so much of that expenditure as is not allowable expenditure;

• “relevant decommissioning”, in relation to general decommissioning expenditure, means the decommissioning to which the expenditure relates.]

(5)All such adjustments, by discharge or repayment of tax or otherwise, are to be made as are necessary to give effect to this section.

[F17(6)For the purposes of this section, it does not matter if approval of an 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.

[F18(6A)If the former trader—

(a)carries on more than one trade,

(b)makes up accounts of any of them to different dates, and

(c)does not make up general accounts for the whole of the company's activities,

subsection (1C)(b) applies with reference to the accounting date of such one of the trades as the former trader may determine.

(6B)If the Commissioners for Her Majesty's Revenue and Customs are of the opinion, on reasonable grounds, that a date determined by the former trader for the purposes of subsection (6A) is inappropriate, the Commissioners may by notice direct that the accounting date of such other of the trades referred to in that subsection as appears to the Commissioners to be appropriate is to be used instead.]

(7)In this section—

• “abandonment programme” means an abandonment programme 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—

  (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;

  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 Act 1998.]