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HMRC internal manual

Oil Taxation Manual

Field allowance: what is the field allowance?

The field allowance reduces the amount of adjusted ring fence profits for the licensee’s accounting period on which the company’s Supplementary Charge is charged. The legislation was introduced in FA2009 at Schedule 44. The legislation is now at CTA2010\S333 onwards and has been supplemented by four Statutory Instruments:

  • the Field Allowance for New Oil Fields Order 2010 (2010 No. 610) for deep water gas fields
  • the Qualifying Oil Fields Order 2010 (2010 No. 1899) for ultra high pressure/high temperature oil fields,
  • the Qualifying Oil Fields Order 2010 (2010 No. 3153) for small oil fields, large deep water oil fields, large shallow water gas fields and deep water gas fields (and this order revoked 2010 No. 610), and
  • The Additionally-Developed Oil Fields Order 2013 (2013 No 2910) for incremental projects in existing fields.

The legislation was amended by FA2011\S63.

The field allowance legislation was amended by FA2012\S184 & FA2012\Sch22. This includes the provision for the legislation’s extension to existing fields as additionally developed oil fields. The amendments to provide this extension came into force on 01 April 2013.

Field allowance is mandatory and no claim is required. A company that is due a field allowance deduction for an accounting period will show the amount of the deduction when submitting its CT return.

The field allowance is available for a company that is a licensee in an eligible oil field, being an oil field which is an additionally-developed oil field or a new oil field.

A new oil field is a qualifying oil field and one which receives its first authorisation of development (in whole or part) on or after 22 April 2009. The field allowance applies to accounting periods ending on or after that date. However, a field that has been decommissioned and is then redeveloped can qualify for the field allowance if certain conditions are fulfilled, see OT21407 below.

A qualifying field is a field that on the authorisation day is a small field, an ultra heavy oil field, an ultra high pressure/high temperature oil field or a deep water gas field, as defined in the legislation and described below. Fields continue to be determined by DECC on geological grounds.

In March 2012 and July 2012 the Government announced further categories of qualifying field in respect of particularly deep fields with sizeable reserves, and large shallow-water gas fields. These changes came into force on 21 December 2012.

A field is an additionally-developed oil field if

  • a national authority has authorised a project described in an addendum to the consent for development for the oil field, and
  • the project meets such conditions as may be specified in an order made by HMRC.

**  This guidance is superseded by the introduction of the Investment Allowance legislation in Finance Act 2015. This applies to investment expenditure incurred on or after 1 April 2015.  The relevant legislation is in Part 8 Chapter 6A of CTA 2010.  Transitional rules are at paragraphs 7 and 8 of Part 2 Schedule 12 Finance Act 2015.  Full updated guidance will be provided shortly.  **