Leasing expenditure
4.—(1) Expenditure is “leasing expenditure” for the purposes of these Regulations if it satisfies Conditions A to E.
(2) Condition A is that the expenditure is incurred by a company in relation to the lease of an asset.
(3) Condition B is that the asset is a mobile asset whose main function is the production or storage of oil.
(4) Condition C is that the lease is for a term of 5 years or longer.
(5) Condition D is that the asset is used in—
(a)a qualifying oil field whose development was authorised for the first time on or after 8th July 2015;
(b)a qualifying oil field in respect of which—
(i)the national authority authorised a project in relation to the oil field after consent for development of the field was first granted,
(ii)the project was described in a further consent for development of the field,
(iii)the project was authorised on or after 8th July 2015, and
(iv)the asset is used for the purposes of the project in respect of which the authorisation was granted; or
(c)a cluster area that was determined on or after 3rd December 2014.
(6) Condition E is that on the date that the expenditure is incurred, no company has generated investment allowance or cluster area allowance in respect of the acquisition of the asset.
(7) In paragraph (2) (Condition A)—
(a)expenditure is incurred in relation to the lease of an asset only to the extent that it represents payment in return for the asset being made available;
(b)expenditure which does not represent payment in return for the asset being made available includes, in particular, any—
(i)charge for the provision of any staff,
(ii)charge for any services,
(iii)amount payable which is, or represents, a profit or premium on the cost of the asset being made available which is paid by a company to an associated company(1),
(iv)amount which, in accordance with generally accepted accounting practice, falls (or would fall) to be shown in the company’s accounts as a finance charge in respect of a lease, or
(v)amount that can be attributed to finance costs by reference to the interest rate implicit in the lease, being the interest rate that would apply to the lease in accordance with normal commercial criteria, including, in particular, generally accepted accounting practice (if applicable).
(8) In paragraph (5) (Condition D)—
(a)references to—
(i)authorisation of development of an oil field, and
(ii)consent for development,
are to be interpreted in accordance with section 356IB of the Corporation Tax Act 2010(2); and
(b)“development”, and “national authority” have the same meanings as in section 356IB(2) of the Corporation Tax Act 2010.
The meaning of “associated companies” is given in section 271 of the Corporation Tax Act 2010.
Section 356IB was inserted by paragraph 7 of Part 1 of Schedule 14 to the Finance Act 2015.