OT27030 - Abandonment and Decommissioning

Writing down allowances: Offshore Oil Infrastructure decommissioning expenditure

FA01 inserted new sections into CAA90 and CAA01 to extend the relief previously available for the net cost of demolition of machinery or plant under CAA90\s62 (CAA01\s26) to the costs of decommissioning offshore oil infrastructure ( OT27032) in UK or non-UK oil fields.

Relief is given on the 25% reducing balance basis by adding the decommissioning expenditure (OT27031) incurred in any chargeable period to the qualifying expenditure on machinery or plant for that period. It is given to ring fence trades where no election for the special allowance is made ( OT27010) and to non-ring fence oil extraction trades.

The relevant machinery or plant has to have been brought into use for the purposes of an oil extraction trade and to be, or have been when last in use, offshore infrastructure.

Relief is only due in respect of UK offshore infrastructure if the decommissioning expenditure is incurred in connection with measures taken, wholly or substantially, to comply with an abandonment programme within Section 29 Petroleum Act 1998 or any condition to which approval of such a programme is subject (see OT27014).

Relief cannot be claimed in respect of any expenditure otherwise allowable in computing income. In other words double deductions for the same expenditure are precluded.

The legislation is at CAA90\s62AA (CAA01\s161C and CAA01\s161D).