Corporation Tax Act 2010 (c. 4)

Part 8 U.K. Oil activities

[F1 CHAPTER 6A U.K. Supplementary charge: investment allowance

Textual Amendments

F1 Pt. 8 Ch. 6A inserted (with effect in accordance with Sch. 12 para. 5 7 8 of the amending Act) by Finance Act 2015 (c. 11), Sch. 12 para. 2

Modifications etc. (not altering text)

C1 Pt. 8 Ch. 6A restricted (26.3.2015) by Finance Act 2015 (c. 11), Sch. 13 para. 6(2)

Activated and unactivated allowance: basic calculation rules U.K.

332F Activation of allowance: no change of equity share U.K.

(1) This section applies where—

(a) for the whole or part of an accounting period, a company is a licensee in a qualifying oil field,

(b) the accounting period is not divided into reference periods (see section 332G),

(c) the company holds, for the accounting period and the qualifying oil field, a closing balance of unactivated allowance (see section 332FA) which is greater than zero, and

(d) the company has relevant income from the qualifying oil field for the accounting period.

(2) The amount of activated allowance the company has for that accounting period and that qualifying oil field is the smallest of—

(a) the closing balance of unactivated allowance held for the accounting period and the oil field;

(b) [F2 the total amount of] the company's relevant income from that oil field for that accounting period;

(c) in a case where section 332FB applies, the relevant activation limit for the accounting period and the oil field (see subsection (2) of that section).

[F3 (3) For the purposes of this Chapter, income is relevant income of a company from a qualifying oil field for an accounting period if it is—

(a) production income of the company from any oil extraction activities carried on in that oil field that is taken into account in calculating the company's adjusted ring fence profits for the accounting period, or

(b) income that—

(i) is income of such description (whether or not relating to the oil field) as may be prescribed by the Treasury by regulations, and

(ii) is taken into account as mentioned in paragraph (a).

(4) The Treasury may by regulations make such amendments of this Chapter as the Treasury consider appropriate in consequence of, or in connection with, any provision contained in regulations under subsection (3)(b).

(5) Regulations under subsection (3)(b) or (4) may provide for any of the provisions of the regulations to have effect in relation to accounting periods ending before (or current when) the regulations are made.

(6) But subsection (5) does not apply to—

(a) any provision of amending or revoking regulations under subsection (3)(b) which has the effect that income of any description is to cease to be treated as relevant income of a company from a qualifying oil field for an accounting period, or

(b) provision made under subsection (4) in consequence of or in connection with provision within paragraph (a).

(7) Regulations under this section may make transitional provision or savings.

(8) Regulations under this section may not be made unless a draft of the instrument containing them has been laid before, and approved by a resolution of, the House of Commons.]

[F4 (9) Where a tariff receipt of the company relates only partly to the oil field mentioned in subsection (1), for the purposes of subsection (3)(b) the tariff receipt is to be attributed to the oil field on a just and reasonable basis.

(10) If the company has entered into any arrangements the purpose, or one of the main purposes of which is—

(a) to cause income to fall within subsection (3)(b), or

(b) to advance the time at which any income falls within that provision,

any income arising in connection with the arrangement is not regarded as a tariff receipt for the purposes of subsection (3)(b).

(11) In subsection (10) “arrangement” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).]

Textual Amendments

F2 Words in s. 332F(2)(b) inserted (15.9.2016) by Finance Act 2016 (c. 24), s. 60(2)

F3 Ss. 332F(3)-(8) substituted for s. 332F(3) (15.9.2016) by Finance Act 2016 (c. 24), s. 60(3)

F4 Ss. 332F(9)-(11) inserted (with effect in accordance with reg. 1(2) of the amending S.I.) by The Investment Allowance and Cluster Area Allowance (Relevant Income Tariff Receipts) Regulations 2019 (S.I. 2019/63), regs. 1(1), 4(2)

332FA The closing balance of unactivated allowance for an accounting period U.K.

The closing balance of unactivated allowance held by a company for an accounting period and a qualifying oil field is—

where—

• P is the amount of investment allowance generated by the company in the qualifying oil field in the accounting period (including any amount treated under section 332IB(1) as generated by the company in that field in that accounting period);

• Q is any amount carried forward from an immediately preceding accounting period under section 332FC(1) or from an immediately preceding reference period under section 332HB(1).

332FB Activation limit for former additionally-developed fields U.K.

(1) This section applies to a company for an accounting period in relation to an oil field if—

(a) immediately before 1 April 2015 the oil field was an additionally-developed oil field for the purposes of Chapter 7 as a result of a project that fell within section 349A(1), and

(b) the project is not an excluded project (see subsection (3)).

(2) For the purposes of section 332F(2)(c), the “relevant activation limit” for the accounting period and the oil field is the amount that would be the closing balance of unactivated allowance held by the company for the accounting period if paragraph 7(3) of Schedule 12 to FA 2015 (conversion of unactivated field allowance) had never applied to any allowance attributable to the project.

(3) The project is an “excluded” project if condition A or condition B is met.

(4) Condition A is that—

(a) a substantial amount of work has been done in relation to the project, and

(b) the accounting period begins on or after the first day of the year of expected first production for the project.

(5) The “year of expected first production” for the project is the year that was notified to the Secretary of State, on or before the day on which the project was authorised by the Secretary of State, as the calendar year in which additional reserves of oil were expected to be first won from the field as a result of the project.

(6) Condition B is that the accounting period begins on or after the day determined under section 332DB(5) as that on which the project was materially completed.

332FC Carrying forward of unactivated allowance U.K.

(1) If, in the case of an accounting period of a company and a qualifying oil field, the amount given by subsection (2) is greater than zero, that amount is treated as investment allowance held by the company for that oil field for the next period (and is treated as held with effect from the beginning of that period).

(2) The amount is—

where—

U is the closing balance of unactivated allowance held for the accounting period and the qualifying oil field (see section 332FA);

A is the amount of activated allowance that the company has for the accounting period and the qualifying oil field (see section 332F(2));

T is any amount that is required by section 332IA(1) (reduction of allowance if equity disposed of) to be deducted in connection with a disposal or disposals made on the day following the end of the accounting period.

(3) If the accounting period is followed by a reference period of the company belonging to that qualifying oil field (see section 332G), “the next period” means that period.

(4) If subsection (3) does not apply “the next period” means the next accounting period of the company.]