Corporation Tax Act 2010 section 332IA

Reduction of allowance if equity is disposed of

Section 332IA sets out how a company's investment allowance and cumulative relevant expenditure figures must be reduced when it disposes of some or all of its equity interest in a qualifying oil field.

• When a company sells part or all of its equity in a qualifying oil field, any unactivated (i.e. unused) investment allowance carried forward must be reduced in proportion to the equity disposed of.
• The reduction is calculated by applying the fraction of equity sold (the difference between the equity held before and after disposal, divided by the equity held before disposal) to the relevant allowance or expenditure amount.
• Separate but similarly structured reductions apply to the cumulative total of relevant expenditure used under the rules for new oil fields and for additionally developed oil fields, ensuring those running totals also reflect the reduced equity interest.
• In each case, the reduction takes effect either from the carry-forward of the period just ended (for unactivated allowance) or from the start of the period beginning on the day of the disposal (for cumulative expenditure).