Corporation Tax Act 2010 section 356E

Activation of allowance: no change of equity share

Section 356E sets out how onshore allowance is activated where a company's equity share in a site remains unchanged throughout the relevant accounting period, capping the activated amount at the level of relevant income from that site.

• The section applies where a company holds a licence for an area containing a site, its equity share in the site stays the same throughout the period, it has a positive closing balance of unactivated allowance, and it has relevant income from the site.
• The activated allowance for the period and site is the lower of the closing balance of unactivated allowance and the company's relevant income from the site for that period.
• "Relevant income" means production income from oil extraction activities carried on at the site that is included in the calculation of the company's adjusted ring fence profits.
• The effect is that a company cannot activate more allowance than the income it actually earns from the site in the period, ensuring the relief is matched against real production income.