What does section 293 of the Corporation Tax Act 2010 provide?

Section 293 provides tax relief against ring fence profits where an oil field participator reimburses a guarantor who initially met the participator's share of decommissioning costs. This ensures the participator receives the same tax deduction as if they had paid the abandonment costs directly.

Why is relief needed for reimbursement expenditure under abandonment guarantees?

Without this relief, a tax mismatch would arise. The guarantor would have met the decommissioning cost, but the participator would receive no deduction when repaying the guarantor. Section 293 closes this gap by treating the reimbursement as eligible for relief against ring fence profits.

What are ring fence profits in the context of section 293?

Ring fence profits are those arising from oil extraction activities in the UK and the UK Continental Shelf. These profits are subject to a separate corporation tax regime with its own rates and rules. The relief under section 293 ensures reimbursement expenditure falls within that ring fence for deduction purposes.

Is there an equivalent income tax provision to section 293 CTA 2010?

Yes, an equivalent rule exists for income tax purposes under section 225O of the Income Tax (Trading and Other Income) Act 2005. This parallel provision ensures that individuals or entities within the income tax regime also receive relief when reimbursing guarantors for abandonment costs.

Corporation Tax Act 2010 section 293

Relief for reimbursement expenditure under abandonment guarantees

Section 293 provides relief against ring fence profits where a participator in an oil field has had decommissioning costs initially met by a guarantor and subsequently reimburses that guarantor.

Where a participator's share of oil field decommissioning costs is covered by a guarantee, and the participator later reimburses the guarantor, tax relief is available.
The relief applies specifically against ring fence profits — that is, profits from oil extraction activities subject to the ring fence corporation tax regime.
The provision ensures that a participator who repays a guarantor for meeting abandonment obligations is not left without the tax deduction they would have received had they paid the costs directly.
An equivalent rule exists for income tax purposes under section 225O of the Income Tax (Trading and Other Income) Act 2005.

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