Corporation Tax Act 2010 section 298

Reimbursement by defaulter in respect of certain abandonment expenditure

Section 298 deals with the tax treatment when a defaulting participator in an oil field reimburses another participator who has covered the defaulter's share of decommissioning costs.

• When a participator defaults on their share of oil field decommissioning costs and another participator steps in to pay, the defaulter may later reimburse the paying participator — this section governs the tax consequences of that reimbursement.
• The defaulting participator who makes the reimbursement receives tax relief against their ring fence profits, reflecting the fact that the payment relates to legitimate decommissioning expenditure.
• The participator who originally covered the defaulter's costs and now receives the reimbursement is treated as having additional ring fence income, effectively reversing the relief they would have obtained when they initially bore the cost.
• Any claim for relief by the defaulter must be made within four years of the end of the accounting period in which the reimbursement is made.