Capital Allowances Act 2001

Provisions relating to ring fence trades U.K.

162 Ring fence trade a separate qualifying activity U.K.

(1) If a person carries on a ring fence trade, it is a separate qualifying activity for the purposes of this Part.

(2) In this Chapter “ring fence trade” means activities which—

(a) fall within [F1 the definition of “oil-related activities” in section 16(2) of ITTOIA 2005 or within] [F1 the definition of “oil-related activities” in section 16(2) of ITTOIA 2005 or within] any of paragraphs (a) to (c) of section 492(1) of ICTA (oil extraction activities, the acquisition, enjoyment or exploitation of oil rights, etc.), and

(b) constitute a separate trade (whether as a result of [F2 section 16(1) of ITTOIA 2005 or] [F2 section 16(1) of ITTOIA 2005 or] section 492(1) of ICTA or otherwise).

Textual Amendments

F1 Words in s. 162(2)(a) inserted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5) , s. 883(1) , Sch. 1 para. 545(a) (with Sch. 2 )

F2 Words in s. 162(2)(b) inserted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5) , s. 883(1) , Sch. 1 para. 545(b) (with Sch. 2 )

163 Meaning of “abandonment expenditure” U.K.

(1) In sections 164 and 165 “abandonment expenditure” means expenditure which meets the requirements in subsections (2) to (4).

(2) The expenditure must have been incurred—

(a) for the purposes of, or in connection with, the closing down of an oil field or of any part of an oil field, and

(b) on the [F3 decommissioning] plant or machinery—

(i) which has been brought into use for the purposes of a ring fence trade, and

(ii) which is, or forms part of, an offshore installation or a submarine pipeline [F4 or which, when last in use for the purposes of a ring-fence trade, was, or formed part of, such an installation or pipeline.]

(3) The [F5 decommissioning] of the plant or machinery must be carried out, wholly or substantially, to comply with—

(a) an abandonment programme, or

(b) any condition to which the approval of an abandonment programme is subject.

(4) The plant or machinery must not be replaced.

[F6 (4A) In this section “ decommissioning ”, in relation to any plant or machinery, means—

(a) demolishing the plant or machinery,

(b) preserving the plant or machinery pending its reuse or demolition,

(c) preparing the plant or machinery for reuse, or

(d) arranging for the reuse of the plant or machinery.

(4B) In determining whether expenditure is incurred on preserving plant or machinery pending its reuse or demolition, it is immaterial whether the plant or machinery is reused, is demolished or is partly reused and partly demolished.

(4C) In determining whether expenditure is incurred on preparing plant or machinery for reuse, or on arranging for the reuse of plant or machinery, it is immaterial whether the plant or machinery is in fact reused.]

(5) In this section—

(a) “oil field” has the same meaning as in Part I of OTA 1975, and

(b) “abandonment programme”, “offshore installation” and “submarine pipeline” have the same meaning as in Part IV of the Petroleum Act 1998 (c. 17).

Textual Amendments

F3 Words in s. 163(2)(b) substituted (with effect as mentioned in Sch. 20 para. 9(1)(5)(8) of the amending Act) by Finance Act 2001 (c. 9), s. 68, Sch. 20 Pt. 2 para. 6(2)

F4 Words in s. 163(2)(b)(ii) inserted (with effect as mentioned in Sch. 20 para. 9(1)(5)(8) of the amending Act) by Finance Act 2001 (c. 9), s. 68, Sch. 20 Pt. 2 para. 6(3)

F5 Word in s. 163(3) substituted (with effect as mentioned in Sch. 20 para. 9(1)(5)(8) of the amending Act) by Finance Act 2001 (c. 9), s. 68, Sch. 20 Pt. 2 para. 6(4)

F6 S. 163(4A)-(4C) inserted (with effect as mentioned in Sch. 20 para. 9(1)(5)(8) of the amending Act) by Finance Act 2001 (c. 9), s. 68, Sch. 20 Pt. 2 para. 6(5)

164 Abandonment expenditure incurred before cessation of ring fence trade U.K.

(1) If a person carrying on a ring fence trade incurs abandonment expenditure, [F7 and the plant or machinery concerned has been brought into use for the purposes of that trade,] he may elect to have a special allowance made to him.

(2) The election—

(a) must be made by notice to [F8 an officer of Revenue and Customs] no later than 2 years after the end of the chargeable period in which the abandonment expenditure is incurred, and

(b) is irrevocable.

(3) The election must specify—

(a) the abandonment expenditure to which it relates, and

[F9 (b) where the plant or machinery concerned has been or is to be demolished, any amounts received for its remains.]

(4) If a person makes an election under this section—

(a) he is entitled to a special allowance F10 ... for the chargeable period in which the abandonment expenditure is incurred, and

[F11 (b) neither of sections 26(3) and 161C(2)(net cost of demolition where plant or machinery not replaced, or cost of preparing for reuse, added to existing pool) applies.]

[F12 ( 5 ) The amount of the special allowance for a chargeable period is equal to so much of the abandonment expenditure to which the election relates as is incurred in that period.

(6) If plant or machinery is demolished, the total of any special allowances in respect of expenditure on decommissioning the plant or machinery is reduced by any amount received for the remains of the plant or machinery.

Here “ decommissioning ” has the meaning given by section 163(4A).

(7) Effect is given to subsection (6) by setting the amount (until wholly utilised)—

• first, against any special allowance for the chargeable period in which the amount is received (as previously reduced in giving effect to subsection (6));

• second, against special allowances for earlier chargeable periods (as so reduced and taking later such periods before earlier ones); and

• third, against special allowances for later chargeable periods (as so reduced and taking earlier such periods before later ones). ]

Textual Amendments

F7 Words in s. 164(1) inserted (retrospectively) by Finance Act 2001 (c. 9) , s. 68 , Sch. 20 Pt. 2 paras. 7(2) , 9(9)

F8 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 83(1); S.I. 2005/1126, art. 2(2)(h)

F9 S. 164(3)(b) substituted (with effect as mentioned in Sch. 20 para. 9(1)(5)(8) of the amending Act) by Finance Act 2001 (c. 9), s. 68, Sch. 20 Pt. 2 para. 7(3)

F10 Words in s. 164(4)(a) repealed (with effect as mentioned in Sch. 20 para.9(1)(5)(8) of the amending Act) by Finance Act 2001 (c. 9), s. 68, 110, Sch. 20 Pt. 2 para. 7(4), Sch. 33 Pt. 2(5) Note 1

F11 S. 164(4)(b) substituted (with effect as mentioned in Sch. 20 para. 9(1)(5)(8) of the amending Act) by Finance Act 2001 (c. 9), s. 68, Sch. 20 Pt. 2 para. 7(5)

F12 S. 164(5)-(7) substituted (with effect as mentioned in Sch. 20 para. 9(1)(5)(8) of the amending Act) for s. 164(5) by Finance Act 2001 (c. 9), s. 68, Sch. 20 Pt. 2 para. 7(6)

165 Abandonment expenditure within 3 years of ceasing ring fence trade U.K.

(1) This section applies if—

(a) a person (“the former trader”) has ceased to carry on a ring fence trade,

(b) the former trader incurs abandonment expenditure F13 ... within the post-cessation period, and

(c) the abandonment expenditure is not otherwise deductible in calculating the income of the former trader for any tax purpose.

(2) “The post-cessation period” means the period of 3 years immediately following the last day on which the former trader carried on the ring fence trade.

(3) If this section applies—

(a) an amount equal to the relevant abandonment cost is allocated to the appropriate pool for the chargeable period in which the former trader ceased to carry on the ring fence trade, and

(b) [F14 where any of the abandonment expenditure was incurred on the demolition of plant or machinery,]any amount received within the post-cessation period for the remains of the plant or machinery does not constitute income of the former trader for any tax purpose.

(4) In subsection (3)—

• “the appropriate pool” means the pool to which the expenditure on the demolished plant or machinery has been allocated, and

• “the relevant abandonment cost” means the amount by which the abandonment expenditure exceeds any amounts received within the post-cessation period for the remains of [F15 any plant or machinery on whose demolition any of the abandonment expenditure was incurred].

(5) All such adjustments, by discharge or repayment of tax or otherwise, are to be made as are necessary to give effect to this section.

Textual Amendments

F13 Words in s. 165(1)(b) repealed (retrospectively) by Finance Act 2001 (c. 9) , s. 68 , 110 , Sch. 20 Pt. 2 para. 8(2) , Sch. 33 Pt. 2(5) , Note 2

F14 Words in s. 165(3)(b) inserted (with effect as mentioned in Sch. 20 para. 9(1)(5)(8) of the amending Act) by Finance Act 2001 (c. 9), s. 68, Sch. 20 para. 8(3)

F15 Words in s. 165(4) substituted (with effect as mentioned in Sch. 20 para. 9(1)(5)(8) of the amending Act) by Finance Act 2001 (c. 9), s. 68, Sch. 20 para. 8(4)