Corporation Tax Act 2010 section 297

Relief for expenditure incurred by a participator in meeting defaulter's abandonment expenditure

Section 297 provides tax relief to a participator who picks up the decommissioning costs that another participator (the "defaulter") has failed to meet.

• Where a contributing participator meets abandonment expenditure that a defaulter should have paid, the contributing participator can claim capital allowances or deductions against ring fence income for that expenditure.
• The relief is determined on the assumption that the defaulter had incurred the expenditure themselves and was still carrying on a ring fence trade at the time.
• In practice, the relief is given as though the contributing participator had incurred the additional abandonment expenditure directly for the purposes of their own ring fence trade.
• This ensures that a participator who steps in to cover a defaulter's decommissioning obligations is not financially penalised from a tax perspective for doing so.