Corporation Tax Act 2010 section 298A

Receipts arising from decommissioning

Section 298A deals with the tax treatment of amounts received by an oil and gas company that steps in to cover another company's defaulted decommissioning obligations, where the stepping-in company ends up being overcompensated through guarantee payments, reimbursements and tax relief.

• Where a company defaults on its decommissioning obligations and another ring fence trade company pays towards meeting that default, the section applies if the contributing company is overcompensated through guarantee payments, reimbursements and tax relief
• The excess of those compensating amounts over the contribution actually made (the "relevant difference") is treated as taxable income of the contributing company's ring fence trade
• The income is recognised in the accounting period that includes the date the Secretary of State certifies the abandonment programme as satisfactorily completed, unless the contributing company has already ceased trading or left the corporation tax charge
• Any additional corporation tax assessment needed to account for this deemed receipt may be raised up to four years after the end of the calendar year in which the certification date falls