OT64030 - Transferable tax history - Activation - Total decommissioning expenditure amount
The total decommissioning expenditure amount in relation to a TTH asset is defined in FA19\Sch15\Para30(2).
The total decommissioning expenditure amount should be calculated at the end of each accounting period, by taking the relevant proportion of the sum of the decommissioning expenditure amounts attributable to the TTH asset for each accounting period which is a post-acquisition accounting period.
In this context, the relevant proportion is the proportion that the TTH asset bears to the purchaser’s other interests in the oil field. Consequently, if the purchaser already had a 20% interest in a field, and acquired a further 30% in a TTH transaction, then the relevant proportion would be 60% (i.e. 30% of the total 50% interest held).
The decommissioning expenditure amount attributable to the asset for each period is the sum of the following three amounts:
- The special allowance amount
- The post-cessation expenditure amount
- The restoration expenditure amount
The special allowance amount is the amount of any expenditure in respect of which an allowance has been made to the purchaser under CAA01\S164, where the expenditure was incurred on decommissioning plant or machinery that was used wholly or partly in relation to oil-related activities in direct connection with the TTH oil field.
The post-cessation expenditure amount is the amount of any expenditure in respect of which an allowance has been made to the purchaser under CAA01\S165, where the expenditure was incurred on decommissioning plant or machinery that was used wholly or partly in relation to oil-related activities in direct connection with the TTH oil field.
The restoration expenditure amount is the amount of any expenditure in respect of which an allowance has been made to the purchaser under CAA01\S416ZA, where the expenditure was incurred on site restoration in relation to the TTH oil field.
It will normally be obvious whether expenditure is incurred in connection with the decommissioning of the TTH oil field. For example, in the case of plant or machinery, there should be clear evidence of the plant or machinery being used in relation to the TTH field. Where plant or machinery has been only partly used in connection with the TTH oil field, the expenditure should be apportioned on a just and reasonable basis. For example, in the case of the decommissioning of a pipeline which has been used to transport oil from the TTH oil field and other oil fields, it may be appropriate to apportion on the basis of throughput, so that only a proportional share of the decommissioning expenditure is taken into account in calculating the decommissioning expenditure amount for the TTH oil field.