Section 87: Decommissioning Relief: Loan Relationships Arising from Decommissioning Security Settlements
Summary
1.Section 87 removes the possibility of income arising in a decommissioning security settlement being taxed twice. The section achieves this by providing that loan relationship debits and credits are not brought into account in respect of a company’s loan relationships, where they arise in relation to a decommissioning security settlement. This section has effect in relation to accounting periods beginning on or after the day that Finance Act 2013 receives Royal Assent.
Details of the Section
2.Subsection (1) inserts a new section 287A into Corporation Tax Act 2010.
3.Subsection (1) of section 287A provides that no loan relationship debits or credits are brought into account in respect of a company’s loan relationships insofar as the loan relationship relates to a decommissioning security settlement.
4.Subsection (2) of section 287A defines “decommissioning security settlement”.
5.Subsection (3) of section 287A provides the meaning of “abandonment programme” and “security”.
Background
6.The legislation relating to the taxation of corporate debt is contained in Part 5 of the Corporation Tax Act 2009 (CTA 2009) which applies to loan relationships. Amounts brought into account as credits and debits for the purposes of these rules are those recognised in determining a company’s profit and loss in accordance with generally accepted accounting practice.
7.It is possible that taxable loan relationship credits might arise where a company makes a payment into a decommissioning security settlement to meet future decommissioning costs. Where these funds are invested and earn interest the income may be taxed twice, once on the decommissioning security settlement and also as a loan relationship credit of the company.
8.This section ensures loan relationship credits and debits are not treated as arising for the purposes of Part 5, Chapter 3, CTA 2009 to a company where they arise in relation to a decommissioning security settlement.
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.
