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HMRC internal manual

Oil Taxation Manual

Non-Residents Working on the UK Continental Shelf: Capital Allowances - Outline

The rules for giving plant and machinery capital allowances to non-residents chargeable under CTA09\S1313 & ITTOIA05\S874 clarify that capital allowances are restricted to the part of the activity that is taxable in the UK. They provide for allowances to be given on the lower of current market value and original cost to the taxpayer when plant and machinery, which has previously been used elsewhere, is brought into the UK Sector of the North Sea and begins to be used for the purposes of the UK Continental Shelf activity. They also provide for a balancing adjustment to be made if the proportion of taxable use is reduced and the allowances that have been given are excessive.

The general conditions as to the availability of plant and machinery allowances are set out in CAA 01\S11 “Allowances are available under this Part if a person carries on a qualifying activity and incurs qualifying expenditure”, and CAA01\S15 provides when defining “qualifying activity” that any reference to a trade shall be construed as a reference to so much of the trade as is within the charge to tax.

This main rule ensures that the rules for giving plant & machinery are applied to the part of the trade within the charge to tax under CTA09\S1313 & ITTOIA05\S874 as if that were a separate trade.