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HMRC internal manual

Oil Taxation Manual

HM Revenue & Customs
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Decommissioning and abandonment: general decommissioning expenditure: meaning of general decommissioning expenditure - expenditure incurred on or after 22 April 2009


The term general decommissioning expenditure was introduced by FA2008 and applies for expenditure incurred on or after 12 March 2008.

For the purposes of CAA2001\S164 and CAA2001\S165 the expenditure must meet the conditions set out in OT28040.

For expenditure incurred on or after 22 April 2009 a further condition must be met. The expenditure must additionally have been incurred wholly or substantially in complying with

  • an approved abandonment programme,
  • a condition to which the approval of an abandonment programme is subject, or
  • a condition imposed by the Secretary of State, or an agreement made with the Secretary of State;

    • before the approval of an abandonment programme, and
    • in relation to the decommissioning of the plant or machinery (CAA2001\S163(3A)).

The changes made to CAA2001\S163 to S165 for expenditure incurred on or after 22 April 2009 ensure that companies can claim relief for decommissioning costs only for the accounting period in which the work is actually carried out, rather than for an earlier period. Mid-life decommissioning, or the work in preparing and agreeing an abandonment programme, will qualify for relief.

For expenditure incurred on or after 22 April 2009 the rules were also amended so that ring fence assets put to other use could still access relief for general decommissioning expenditure. The first condition in OT28040 is amended so that the expenditure must have been incurred on decommissioning plant or machinery which has been brought into use wholly or partly for the purpose of a ring fence trade.

HMRC accept that the undertaking of a decommissioning study and the setting of cement plug is within the definition of decommissioning in CAA2001\S163(4A).