Finance Act 2001

Writing-down allowances: infrastructure from UK or non-UK oil fields U.K.

1 In Chapter 7 of Part 2 of the Capital Allowances Act 1990 (c. 1) (machinery and plant: miscellaneous expenditure), after section 62 insert—

“62AA Reuse etc. of offshore oil infrastructure

(1) This section applies where—

(a) a person carrying on a trade of oil extraction incurs decommissioning expenditure, and

(b) the machinery or plant concerned—

(i) has been brought into use for the purposes of the trade, and

(ii) is, or was when last in use for those purposes, offshore infrastructure.

(2) In this section—

• “decommissioning expenditure” has the meaning given by section 62AB;

• “offshore infrastructure” has the meaning given by section 62AC.

(3) The person’s qualifying expenditure for the chargeable period in which the decommissioning expenditure is incurred is treated for the purposes of sections 24 and 25 as increased by the amount of the decommissioning expenditure.

(4) Subsection (3) above is subject to subsections (5) and (6) below and section 62A(4A).

(5) Subsection (3) above does not apply to decommissioning expenditure on UK infrastructure unless it is incurred in connection with measures taken, wholly or substantially, in order to comply with—

(a) an abandonment programme within the meaning given by section 29 of the Petroleum Act 1998 (c. 17), or

(b) any condition to which the approval of such a programme is subject.

(6) Subsection (3) above does not apply to expenditure in respect of which an allowance or deduction could be made apart from that subsection in taxing, or computing, the person’s income for any purpose of income tax or corporation tax.

(7) For the purposes of subsection (5) above, decommissioning expenditure is “on UK infrastructure” if the machinery or plant concerned—

(a) is offshore infrastructure within section 62AC(1)(a) or (c), or

(b) is not offshore infrastructure but was offshore infrastructure within section 62AC(1)(a) or (c) when last in use for the purposes of the trade.

62AB Meaning of “decommissioning expenditure” in section 62AA

(1) In section 62AA “decommissioning expenditure” means expenditure in connection with—

(a) preserving machinery or plant pending its reuse or demolition,

(b) preparing machinery or plant for reuse,

(c) arranging for the reuse of machinery or plant, or

(d) demolishing machinery or plant.

(2) It is immaterial for the purposes of subsection (1)(a) above whether the machinery or plant is reused, is demolished or is partly reused and partly demolished.

(3) It is immaterial for the purposes of subsection (1)(b) and (c) above whether the machinery or plant is in fact reused.

62AC Meaning of “offshore infrastructure” in section 62AA

(1) In section 62AA “offshore infrastructure” means—

(a) an offshore installation within the meaning given by section 44 of the Petroleum Act 1998 or a part of such an installation, or

(b) something that would be, or would be a part of, an offshore installation within that meaning if in subsection (3) of that section “relevant waters” meant waters in a foreign sector of the continental shelf and other foreign tidal waters, or

(c) a pipeline within the meaning of section 26 of that Act, or a part of such a pipeline, that is in, under or over waters in—

(i) the territorial sea adjacent to the United Kingdom, or

(ii) an area designated under section 1(7) of the Continental Shelf Act 1964 (c. 29), or

(d) a pipeline within the meaning of section 26 of the Petroleum Act 1998 (c. 17), or a part of such a pipeline, that is in, under or over waters in a foreign sector of the continental shelf.

(2) In subsection (1)(b) and (d) above—

• “foreign sector of the continental shelf” means an area within which rights are exercisable with respect to the sea bed and subsoil and their natural resources by a country or territory outside the United Kingdom;

• “foreign tidal waters” means tidal waters in an area within which rights are exercisable with respect to the bed and subsoil of the body of water in question and their natural resources by a country or territory outside the United Kingdom.”.