OT27020 - Abandonment and Decommissioning

Ring Fence trades: Allowances for post-cessation expenditure

CAA90\s62B(CAA01\s165) extends relief which would have been given under CAA90\s62A (CAA01\s163 and CAA01\s164) where trading continued to abandonment expenditure incurred in certain circumstances after cessation of a trade. The conditions to be met are:

1. The ring fence trade has ceased.
2. Within a period of 3 years from the date of cessation, expenditure has been incurred on the decommissioning of an offshore installation or submarine pipeline.
3. Relief would have been due if the decommissioning had been carried out and expenditure incurred before cessation of the ring fence trade.
4. The expenditure is not otherwise deductible for tax purposes.

Relief is given by adding the qualifying abandonment expenditure (expenditure incurred less any monies received in the 3 year period for the remains of any of the machinery or plant which has been demolished) to the qualifying expenditure for plant and machinery capital allowances purposes for the chargeable period related to the cessation of the ring fence trade.

No election is required. Where the conditions are met, the appropriate adjustments to the computations “shall be made”. The time limit for a loss relief claim under ICTA 88\s393A(1) is extended from 2 years to 5 years to the extent it relates to a CAA90\s62B (CAA01\s165) adjustment (ICTA 88\s393A(11)).

Where the ring fence trade has ceased but a non-ring fence trade continues, the post cessation qualifying abandonment expenditure must be added to the ring fence qualifying expenditure of the chargeable period related to the cessation of the ring fence trade.

Expenditure incurred and monies received for the remains of plant later than 3 years after the cessation of the ring fence trade are ignored for the purpose of CAA90\s62B (CAA01\s165).