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HMRC internal manual

Oil Taxation Manual

Corporation tax ring fence: onshore allowance - overview


Onshore allowance provides relief for certain capital expenditure incurred for the purposes of onshore oil-related activities and is given by way of reduction of a company’s adjusted ring-fence profits.

The allowance replaces existing field allowances for all onshore fields whose authorisation day is on or after 5 December 2013 although there are transitional provisions whereby the authorisation day is effectively deferred to 1 January 2015. The deferment of the authorisation day is made by joint election of all licensees in the oil field concerned.

The main features of the allowance are:

  1. the need for allowance held for a site to be activated by relevant income from the same site in order for the allowance to be available for reducing adjusted ring-fence profits,
  2. elections by a company to transfer allowance between different sites in which it is a licensee (see S356F), and
  3. mandatory transfers of allowance where shares in the equity in a licensed area are disposed of (see S356H to S356HB and the related provisions in S356G to S356GD).