3Section 2: meaning of “operating expenditure”U.K.
(1)Expenditure incurred by a company is “operating expenditure” for the purposes of section 2 if—
(a)it is incurred for the purpose of increasing—
(i)the rate at which oil is extracted or the reserves of oil,
(ii)the number of years for which it is economically viable to carry out oil extraction activities or for which a facility can be used for the purposes of those activities, or
(iii)the amount of tariff receipts earned by the company in respect of upstream petroleum infrastructure,
(b)it is not routine repair or maintenance expenditure, and
(c)it is incurred in relation to a facility or an oil well on qualifying matters.
(2)Expenditure is incurred in relation to a facility on qualifying matters if it is incurred on—
(a)the replacement of a valve, pump, pipeline, power generation plant or compressor that is no longer capable of being used for the purposes of oil extraction activities,
(b)modifications to increase capacity, or availability, to carry out oil extraction activities, or
(c)modifications to enable handling of reduced volumes resulting from reduced operating pressures or handling of different fluid compositions.
(3)Expenditure is incurred in relation to an oil well on qualifying matters if it is incurred on—
(a)water shut off or gas shut off,
(b)fracturing, or
(c)the removal of sand, salt, scale or hydrates.
(4)For the purposes of this section, where a company incurs expenditure part of which is operating expenditure and part of which is not, the expenditure is to be apportioned on a just and reasonable basis.
[F1(5)In this section “tariff receipts” has the meaning given by section 291A of CTA 2010.]
Textual Amendments
F1S. 3(5) substituted (with effect in accordance with s. 12(7) of the amending Act) by Finance (No. 2) Act 2023 (c. 30), s. 12(5)
Commencement Information
I1S. 3 in force at Royal Assent