Section 225L: Adjustment as a result of regional development grant
720.This section supplements section 225K of ITTOIA and section 534 of CAA where the amount of expenditure involved is redetermined at a later date. It is based on section 495(3) to (7) of ICTA.
721.The most likely application of regional development grants in the oil context is for onshore assets such as initial treatment plants to stabilise the crude oil arriving by pipeline. The eligibility of such assets for PRT relief, or the proportion that is eligible, can take some time to agree. As a result, the PRT position (which determines the amount eligible for capital allowances) may not be finalised for some time.
722.Accordingly, capital allowances could be given on the full amount in the “initial period”, disregarding the grant, as section 534(2) of CAA or its predecessors would not have applied at that stage. Subsection (5) ensures that the position can be adjusted in a later period if a change in circumstances occurs.
723.If the change increases the expenditure eligible for capital allowances, subsection (7) treats the person as having incurred additional expenditure.
724.If the change reduces the eligible expenditure subsection (8) treats the person as receiving a trading receipt.
725.In both cases the adjustment is treated as made in the relevant later period (referred to as the “adjustment period”).
726.Section 137 of FA 1982, referred to in the source legislation, was rewritten in section 534 of CAA.
727.The source legislation applies to expenditure taken into account under Parts 2, 3 or 6 of CAA. Section 84 of FA 2008 repeals Part 3 of CAA for income tax purposes with respect to expenditure incurred on or after 6 April 2011. The section therefore applies to Parts 2 and 6 of CAA and the reference to Part 3 of CAA has been retained for the interim period by way of a transitional provision in Schedule 9.