Corporation Tax Act 2010 section 332H

Activation of allowance: reference periods

Section 332H sets out how to calculate the amount of investment allowance that a company can activate for a qualifying oil field in any given reference period.

• The activated allowance for a reference period is the smallest of three possible amounts: the unactivated allowance attributable to that period and field, the company's relevant income from the field for the period, and (where applicable) the relevant activation limit.
• The company's relevant income from the oil field for a reference period is the portion of its total relevant income from that field for the accounting period that arises during the reference period.
• For certain additionally-developed oil fields subject to an activation limit under section 332FB, a special cap applies that is calculated as if transitional conversion rules for unactivated field allowances had never been applied.
• This mechanism ensures that a company cannot activate more allowance than it has available, more than its income from the field justifies, or more than the activation limit permits for formerly additionally-developed fields.