Section 83: Decommissioning Relief Agreements: Effect of Claim on Prt
Summary
1.Section 83 makes a number of amendments to existing legislation which have the effect of ensuring that no tax relief can be obtained by a company in respect of expenditure, relief for which has already been obtained under a decommissioning relief agreement. These amendments also ensure that where a company’s tax history is used to calculate a payment under a decommissioning relief agreement in respect of any expenditure incurred by a claimant then that tax history will reflect that expenditure so incurred. The amendments come into force in relation to any sum payable to a company under a decommissioning relief agreement on or after the date of Royal Assent to Finance Act 2013.
Details of the Section
2.Subsection (1) provides that this section applies where a sum is payable to a claimant under a decommissioning relief agreement.
3.Subsections (2) and (3) provide that where expenditure incurred by the claimant, and taking into account its assessable profits, is used to calculate the payment under the decommissioning relief agreement then, for the purposes of petroleum revenue tax, the claimant’s profits are treated as reduced by that expenditure as if the payment had been made by way of relief through a repayment of tax.
4.Subsections (4) and (5) provide that where expenditure incurred by the claimant is used to calculate the payment under the decommissioning relief agreement with reference to another company’s assessable profits, then, for the purposes of petroleum revenue tax, that other company’s profits are treated as reduced by that expenditure as if that other company had incurred the expenditure and the payment had been made by way of relief through a repayment of tax.
5.Subsection (6) provides the meaning of “assessable profit”, “chargeable period”, “company”, “decommissioning relief agreement” and “the reference amount”.
Background
6.Companies may obtain relief under a decommissioning relief agreement in respect of expenditure incurred for the purposes of tax. For petroleum revenue tax (PRT) this relief is calculated by reference to assessable profits arising in current and previous chargeable periods. Moreover in a situation where a claimant is incurring decommissioning expenditure as a result of another company defaulting on its decommissioning liability, the profits referred to may be in respect of companies other than the claimant.
7.This section reduces, for the purposes of PRT, assessable profits of a company where those profits have been used to calculate the reference amount under a decommissioning relief agreement. This is achieved by deeming expenditure to have been incurred and applied in the same way as provided for under the decommissioning relief agreement.
8.The effect of this section is to prevent a company obtaining tax relief in respect of profits that have already been used in order to provide relief through the decommissioning relief agreement.
9.The amendments made by this section form part of the Government’s wider package of measures to provide greater certainty in respect of decommissioning tax relief, remove barriers to the transfer of licence interests and increase capacity for additional investment in the UK Continental Shelf.
