How is qualifying restoration expenditure apportioned among oil field participators under section 416ZE?

Under section 416ZE, where restoration expenditure is shared among multiple participators in an oil field based on their respective shares in oil won or field equity, only the portion falling to R counts as R's qualifying expenditure (amount D). Other participators' shares are not relevant to R's mineral extraction allowance claim.

How does section 416ZE handle restoration of sites used for more than one oil field?

Where a site served multiple oil fields, the total restoration expenditure is first divided between those fields in proportion to each field's contribution to the total oil won using the site. R's share of qualifying expenditure is then calculated separately for each field, applying the apportionment rules to the expenditure allocated to that particular field.

When does the anti-avoidance override apply to site restoration apportionments under section 416ZE?

The anti-avoidance override applies if the consideration payable to the restorer, the method for determining that amount, or the way liability is split between participators or fields was agreed as part of an avoidance scheme. A scheme qualifies if a main purpose of any party is to obtain a mineral extraction allowance not otherwise available or more favourable than would otherwise apply.

What happens if the anti-avoidance override in section 416ZE is triggered?

If the avoidance override is triggered, the apportionment rules in section 416ZE are set aside entirely. Instead, the more restrictive calculation rules in section 416ZD(2) of the Capital Allowances Act 2001 are used to determine R's qualifying expenditure for mineral extraction allowance purposes, potentially reducing the allowance available.

Capital Allowances Act 2001 section 416ZE

Allowance where site restoration undertaken for other participators in oil field

Section 416ZE sets out how qualifying expenditure on site restoration is determined when the restoration costs are shared among multiple participators in an oil field.

Where restoration expenditure is apportioned among participators based on their shares in oil won or field equity, only R's share counts as qualifying expenditure
If a site served more than one oil field, the expenditure is first split between fields based on each field's contribution to total oil won, and then R's share is calculated for each field separately
If the consideration payable to the person carrying out the restoration, or the way it is apportioned, has been agreed as part of a tax avoidance scheme, the more restrictive rules in section 416ZD(2) apply instead
An avoidance scheme is one where a main purpose of a party entering into it is to obtain a mineral extraction allowance, or a more favourable allowance, that would not otherwise have been available

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