Part 8Oil activities

F1CHAPTER 9Supplementary charge: cluster area allowance

Activated and unactivated allowance: basic calculation rules

356JHActivation of allowance: no change of equity share

(1)

This section applies where—

(a)

for the whole or part of an accounting period, a company is a licensee in a licensed area or sub-area which is wholly or partly included in a cluster area,

(b)

the accounting period is not divided into reference periods (see section 356JI),

(c)

the company holds, for the accounting period and the cluster area, a closing balance of unactivated allowance (see section 356JHA) which is greater than zero, and

(d)

the company has relevant income from the cluster area for the accounting period.

(2)

The amount of activated allowance the company has for that accounting period and that cluster area is the smaller of—

(a)

the closing balance of unactivated allowance held for the accounting period and the cluster area;

(b)

the company's relevant income for that accounting period from that cluster area.

(3)

In this Chapter “relevant income”, in relation to a cluster area and an accounting period of a company, means production income of the company from any oil extraction activities carried on in that area that is taken into account in calculating the company's adjusted ring fence profits for the accounting period.

356JHAThe closing balance of unactivated allowance for an accounting period

The closing balance of unactivated allowance held by a company for an accounting period and a cluster area is—

P + Q

where—

P is the amount of cluster area allowance generated by the company in the cluster area in the accounting period (including any amount treated under section 356JKB(1) as generated by the company in that cluster area in that accounting period);

Q is any amount carried forward from an immediately preceding accounting period under section 356JHB(1) or from an immediately preceding reference period under section 356JJB(1).

356JHBCarrying forward of unactivated allowance

(1)

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

(2)

The amount is—

U − A − T

where—

U is the closing balance of unactivated allowance held for the accounting period and the cluster area;

A is the amount of activated allowance that the company has for the accounting period and the cluster area (see section 356JH(2));

T is the sum of any amounts transferred by the company under section 356JK 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 cluster area (see section 356JI), “the next period” means that period.

(4)

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