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Paragraph 1 Payments into decommissioning fund treated as general decommissioning expenditure

United Kingdom

(1)

A qualifying payment into a decommissioning fund is treated for tax purposes as—

(a)

expenditure incurred in decommissioning a qualifying asset falling within section 3(1)(i) of the Oil Taxation Act 1975 (allowance of expenditure),

(b)

general decommissioning expenditure falling within section 163 of CAA 2001 (allowances for decommissioning expenditure),

(c)

decommissioning expenditure falling within section 330C of CTA 2010 (decommissioning expenditure taken into account in calculating ring fence profits), and

(d)

decommissioning expenditure falling within section 9(3) of the Energy (Oil and Gas) Profits Levy Act 2022 (meaning of decommissioning costs).

(2)

A payment into a decommissioning fund is qualifying if—

(a)

the relevant transferred plant or machinery to which the payment relates is—

(i)

an eligible CCS installation which qualifies for change of use relief under section 30A of the Energy Act 2008 (change of use relief for certain installations), or

(ii)

an eligible carbon storage network pipeline which qualifies for change of use relief under section 30B of that Act (change of use relief for carbon storage network pipelines), and

(b)

the payment has been certified in an approval notice given under section 30A(5)(b) or 30B(3)(b) of that Act.

(3)

For the purposes of sub-paragraph (2), a payment to a licensed company under an agreement to pay a required amount for the purposes of payment into the decommissioning fund is to be regarded as a payment into that fund.

(4)

But the onward payment into the fund by that licensed company is not a qualifying payment.

(5)

In this Schedule—

  • “decommissioning fund” is to be interpreted in accordance with section 92(7)(a) of the Energy Act 2023 (financing costs of decommissioning etc);

  • “licensed company” means a person who holds a licence under section 7 of the Energy Act 2023 (licences for carbon dioxide transport and storage);

  • “relevant transferred plant or machinery” is to be construed in accordance with paragraph 2;

  • “required amount” means an amount determined by the Secretary of State in accordance with regulations made under section 30A(5A)(b) or 30B(3A)(b) (as the case may be) of the Energy Act 2008 (amount required to be paid into a decommissioning fund);

  • “ring fence trade” means activities which—

    1. (a)

      fall within the definition of “oil-related activities” in section 16(2) of ITTOIA 2005 or section 274 of CTA 2010, and

    2. (b)

      constitute a separate trade (whether as a result of section 16(1) of ITTOIA 2005 or section 279 of CTA 2010 or otherwise);

  • “tax purposes” means for the purposes of—

    1. (a)

      corporation tax (including for the purposes of the supplementary charge in respect of ring fence trades and the energy (oil and gas) profits levy);

    2. (b)

      income tax;

    3. (c)

      petroleum revenue tax.