OT27038 - Abandonment and Decommissioning

Writing down allowances: Net cost of demolition

Following the FA 01 changes, the general tax provision giving relief for the net cost of demolition of machinery or plant remains on the statute book as CAA90\s62 (CAA01\s26).

It is not expected claims will be made under this section for offshore assets as it will probably be beneficial or more convenient to include any qualifying expenditure in decommissioning expenditure claims. Claims will still be met for onshore assets but it is not thought these will give rise to any features not met in connection with other industries.

In particular, it is unlikely that the demolition of onshore assets will extend over several chargeable periods as has been the case with some offshore assets. If it does, OTO has accepted that, in practice, relief may commence as expenditure is incurred rather than when demolition is completed. It is however important that relief under this section is due on the net cost of demolition and costs which are not part of this process will not qualify for relief. Cases of difficulty, e.g. where the ultimate fate of the machinery or plant in question is uncertain, should be referred to an Assistant Director.