Capital Allowances Act 2001 section 165D

Allowance where decommissioning undertaken for other participators in oil field

Section 165D determines how the decommissioning allowance is calculated where the cost of decommissioning plant or machinery used in an oil field is shared among multiple participators, and includes anti-avoidance provisions to prevent manipulation of the cost apportionment.

• Where a connected person carries out decommissioning and there are multiple participators in an oil field, the total decommissioning cost is split between them according to their shares in the oil won or their equity shares in the field.
• The allowance available to the person claiming (R) is limited to R's apportioned share of the decommissioning expenditure, not the total cost.
• If the plant or machinery served more than one oil field, the decommissioning cost is first divided between the fields based on each field's contribution to total oil production, and then each field's share is further apportioned between its participators.
• If the amount of consideration payable to the connected person, or the way in which the cost is apportioned between participators or fields, has been agreed as part of an avoidance scheme, the normal apportionment rules are overridden and a more restrictive calculation under section 165B(2) applies instead.