Corporation Tax Act 2010 section 332IB

Acquisition of allowance if equity acquired

Section 332IB sets out how a company that acquires an equity interest in a qualifying oil field picks up a share of the transferor's unactivated investment allowance and related expenditure amounts.

• When a company acquires equity in a qualifying oil field and the unactivated allowance condition is met, it is treated as generating investment allowance calculated by the formula R × (E3 / (E1 − E2)), effective from the start of the accounting period in which the disposal occurs
• If the new field expenditure condition is met, the transferee is also treated as having incurred a proportionate share of cumulative relevant expenditure in respect of the field, calculated using the same formula but with R based on the transferor's expenditure reduction
• If the additionally developed field expenditure condition is met, a similar calculation applies to project-related expenditure, with E3 representing the transferee's acquired share of additional oil reserves attributable to the development project rather than overall field equity
• "Project-related reserves" means the additional oil reserves the field holds as a result of the specific development project in question