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HMRC internal manual

Oil Taxation Manual

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Decommissioning and abandonment: general decommissioning expenditure: relief for expenditure incurred after cessation of ring fence trade and on or after 12 March 2008

CAA2001\S165

CAA2001\S165 provides for relief for general decommissioning expenditure where a ring fence trade has ceased on or after 12 March 2008. FA2008 replaced the existing three year time limit with a period based on the time limits and requirements imposed by the Secretary of State for the Department of Energy and Climate Change.

The conditions to be met for post-cessation expenditure to qualify for relief are:

  • the ring fence trade has ceased;
  • the former trader incurs general decommissioning expenditure within the post-cessation period (see OT28210);
  • the expenditure is not otherwise deductible in calculating the income of the former trader for any tax purpose (CAA2001\S165(1)).

The expenditure must also meet the definition of general decommissioning expenditure set out in CAA2001\S163 (see OT28040).

The relief is given by adding the qualifying general decommissioning expenditure less any proceeds from the disposal of the remains of the plant and equipment to the qualifying expenditure for plant and machinery capital allowances purposes for the chargeable period related to the cessation of the ring fence trade. No election is required for this relief.

For expenditure incurred on or after 22 April 2009 the conditions for relief were amended (see OT28205).

Non-ring fence trade continuing

Where the ring fence trade has ceased but a non-ring fence trade continues, the post cessation general decommissioning expenditure is added to the ring fence qualifying expenditure of the chargeable period related to the cessation of the ring fence trade.

Disregarding post-cessation general decommissioning expenditure

Post-cessation general decommissioning expenditure is disregarded for the purposes of CAA2001\S165 in some circumstances. The expenditure is disregarded if both of the following conditions are satisfied (CAA001\S165(4A)),

  • after an abandonment programme relating wholly or partly to the plant and machinery has had its approval withdrawn, and
  • when no other abandonment programme relating wholly or partly to the plant and machinery is approved.

Date of approval of abandonment programme

It does not matter whether approval for the abandonment programme is given before or after the start of the post-cessation period (CAA2001\S165 (6)).

Claiming losses

The time limit for a loss relief claim under CTA2010\S37 is amended to two years after the end of the post-cessation period (see OT28210) to the extent it relates to a CAA2001\S165 adjustment (CTA2010\S43).