OT27002 - Abandonment and Decommissioning

Outline of Legislation

Finance Act 2001 revised the legislation relating to decommissioning expenditure relief with effect from 7 August 2000 (the date of the Ministerial Announcement). This involved amending both CAA 90 which applies to companies to 31 March 2001, and CAA 01, which applies thereafter. CAA 01 arises from the Tax Law Rewrite Project and is intended to put the legislation in more straightforward language but without altering its meaning.

CAA 90\s62A (CAA 01\s163 and CAA 01\s164) is amended to extend 100% relief for demolition costs in ring fence trades to all decommissioning expenditure. The existing conditions for relief broadly continue to apply.

CAA 90\s62AA (CAA 01\s161C) is a new sections giving relief on a 25% reducing balance basis for decommissioning expenditure not qualifying for 100% relief, e.g. because the installations are outside UK waters or other relevant conditions are not met.

CAA 90\s62 (CAA 01\s26), the general tax provision allowing relief for net demolition costs, remains on the statute book but claims by oil companies under that provision are likely to be restricted to onshore assets as relief will normally be given for offshore assets as part of decommissioning expenditure claims