Capital Allowances Act 2001 section 168

Expenditure on plant or machinery incurred by contractor

Section 168 sets out the basic rule allowing a contractor under a production sharing contract to claim plant and machinery allowances on capital expenditure, even after the asset has been transferred to the government or its representative.

• The contractor must incur capital expenditure on plant or machinery specified in the contract, for use in the contractor's trade of oil extraction
• The expenditure must be proportionate to the value of the contractor's interest under the production sharing contract
• Even after the plant or machinery is transferred to the government or representative, it is treated as still owned by the contractor for capital allowances purposes
• This deemed ownership continues until the government or representative disposes of the asset, or it ceases to be used or held for use by anyone under the contract