Finance Act 2013

Finance Act 2013

2013 CHAPTER 29

Introduction

Section 86: Decommissioning Relief: Removal of Iht Charges in Respect of Decommissioning Security Settlements

Summary

1. Section 86 removes the charge to inheritance tax (IHT) on property held in decommissioning security settlements. The section achieves this by amending the definition of relevant property at section 58(1) Inheritance Act 1984 (IHTA) to exclude property held in decommissioning security settlements from that definition. The change is treated as having come into force on 20 March 1993.

Details of the Section

2. Subsection 2 inserts a new section 58(1)(eb) to add property in a decommissioning security settlement as one of the categories of settled property in section 58(1) that is not to be regarded as relevant property. This has the effect of excluding such settlements from the IHT charges which would otherwise apply to relevant property.

3. Subsection 3 inserts new sections 58(6) and 58(7) into IHTA, which define the meaning of “decommissioning security settlement” and explain the meaning of certain terms used in these provisions respectively.

4. Subsection 5 provides necessary linkage to the Petroleum Tax Act 1987 so that the new exclusion in section 58(1) also applies to the equivalent of an approved abandonment programme under that Act.

5. Subsection 6 prevents the charge which would normally arise under section 65 IHTA when property ceases to be relevant property from applying if the only reason for that charge would be that the property in the decommissioning security settlement ceases to be relevant property as a result of the application of these new provisions.

Background

6. Property held in decommissioning security settlements, whether money or alternative provision such as standby letters of credit, is settled property for IHT purposes and as such is “relevant property” as defined in section 58(1) IHTA. Relevant property held in settlements is within the charge to IHT in accordance with the provisions contained in Part 3 of IHTA.

7. The change made by this section forms part of the Government’s wider package of measures to provide greater certainty in respect of decommissioning tax relief, removing barriers to the transfer of licence interests and increasing capacity for additional investment in the UK Continental Shelf.