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HMRC internal manual

Oil Taxation Manual

Non-Residents Working on the UK Continental Shelf: Capital Allowances - Part use of plant & machinery - Reduction of allowances and charges on expenditure in a single asset pool

Under CAA01\S207 capital allowances are reduced in relation to the extent of non-qualifying use. This applies not only to writing-down allowances but also to balancing allowances and charges. CAA01\S207(2) explains how this is to be achieved - on a just and reasonable basis having regard to the relevant circumstances. The words “relevant circumstances” are expanded in CAA01\S207(3) - it includes looking at the extent to which the plant or machinery was used for purposes other than those of the qualifying activity.

Any unrelieved qualifying expenditure carried forward is unaffected by the writing-down reduction.


A non-resident offshore drilling contractor with a fleet of rigs working in the UK sector of the North Sea brings a new-build semi-submersible drilling rig, costing $160m, into the UKCS at the start of the year to fulfil a drilling service contract in the UK sector of the North Sea. However in the first year it spends half of the time working outside the UKCS in the company’s worldwide trade. It is entitled to capital allowances of $160m @25% x 50% = $20m and the unrelieved qualifying expenditure carried forward is $120m ($160m less available WDA $40m).

Special rules apply where there is a significant reduction in use for purposes of qualifying activity (see OT42600).