Capital Allowances Act 2001 (c. 2)

Part 2 U.K. Plant and machinery allowances

Modifications etc. (not altering text)

C1 Pt. 2 (ss. 11-270) modified (prosp.) by Proceeds of Crime Act 2002 (c. 29), ss. 448, 458(1), Sch. 10 para. 12 (with para. 17(1))

Chapter 13 U.K. Provisions affecting mining and oil industries

Provisions relating to ring fence trades U.K.

162 Ring fence trade a separate qualifying activity U.K.

(1) If a person carries on a ring fence trade, it is a separate qualifying activity for the purposes of this Part.

(2) In this Chapter “ring fence trade” means activities which—

(a) fall within any of paragraphs (a) to (c) of section 492(1) of ICTA (oil extraction activities, the acquisition, enjoyment or exploitation of oil rights, etc.), and

(b) constitute a separate trade (whether as a result of section 492(1) of ICTA or otherwise).

163 Meaning of “abandonment expenditure” U.K.

(1) In sections 164 and 165 “abandonment expenditure” means expenditure which meets the requirements in subsections (2) to (4).

(2) The expenditure must have been incurred—

(a) for the purposes of, or in connection with, the closing down of an oil field or of any part of an oil field, and

(b) on the demolition of plant or machinery—

(i) which has been brought into use for the purposes of a ring fence trade, and

(ii) which is, or forms part of, an offshore installation or a submarine pipeline.

(3) The demolition of the plant or machinery must be carried out, wholly or substantially, to comply with—

(a) an abandonment programme, or

(b) any condition to which the approval of an abandonment programme is subject.

(4) The plant or machinery must not be replaced.

(5) In this section—

(a) “oil field” has the same meaning as in Part I of OTA 1975, and

(b) “abandonment programme”, “offshore installation” and “submarine pipeline” have the same meaning as in Part IV of the Petroleum Act 1998 (c. 17).

164 Abandonment expenditure incurred before cessation of ring fence trade U.K.

(1) If a person carrying on a ring fence trade incurs abandonment expenditure, [F1 and the plant or machinery concerned has been brought into use for the purposes of that trade,] he may elect to have a special allowance made to him.

(2) The election—

(a) must be made by notice to the Inland Revenue no later than 2 years after the end of the chargeable period in which the abandonment expenditure is incurred, and

(b) is irrevocable.

(3) The election must specify—

(a) the abandonment expenditure to which it relates, and

(b) any amounts received for the remains of the plant or machinery in question.

(4) If a person makes an election under this section—

(a) he is entitled to a special allowance, of an amount equal to the net abandonment cost, for the chargeable period in which the abandonment expenditure is incurred, and

(b) section 26(3) (net cost of demolition added to existing pool where plant or machinery not replaced) does not apply.

(5) “The net abandonment cost” means the amount by which the abandonment expenditure to which the election relates exceeds any amounts received for the remains of the plant or machinery.

Textual Amendments

F1 Words in s. 164(1) inserted (retrospectively) by Finance Act 2001 (c. 9) , s. 68 , Sch. 20 Pt. 2 paras. 7(2) , 9(9)

165 Abandonment expenditure within 3 years of ceasing ring fence trade U.K.

(1) This section applies if—

(a) a person (“the former trader”) has ceased to carry on a ring fence trade,

(b) the former trader incurs abandonment expenditure F2 ... within the post-cessation period, and

(c) the abandonment expenditure is not otherwise deductible in calculating the income of the former trader for any tax purpose.

(2) “The post-cessation period” means the period of 3 years immediately following the last day on which the former trader carried on the ring fence trade.

(3) If this section applies—

(a) an amount equal to the relevant abandonment cost is allocated to the appropriate pool for the chargeable period in which the former trader ceased to carry on the ring fence trade, and

(b) any amount received within the post-cessation period for the remains of the plant or machinery does not constitute income of the former trader for any tax purpose.

(4) In subsection (3)—

• “the appropriate pool” means the pool to which the expenditure on the demolished plant or machinery has been allocated, and

• “the relevant abandonment cost” means the amount by which the abandonment expenditure exceeds any amounts received within the post-cessation period for the remains of the plant or machinery.

(5) All such adjustments, by discharge or repayment of tax or otherwise, are to be made as are necessary to give effect to this section.

Textual Amendments

F2 Words in s. 165(1)(b) repealed (retrospectively) by Finance Act 2001 (c. 9), s. 68, 110, Sch. 20 Pt. 2 para. 8, Sch. 33 Pt. 2(5), Note 2, (with effect as mentioned in Sch. 20 para. 9(1)(5)(8))