When is capital expenditure treated as incurred under section 7 of the Energy (Oil and Gas) Profits Levy Act 2022?

Capital expenditure timing follows the rules in section 5 of the Capital Allowances Act 2001. Expenditure is generally treated as incurred when the obligation to pay becomes unconditional, regardless of when payment is actually made. The Energy Profits Levy adopts these existing rules directly rather than creating separate timing provisions for capital spending.

How is the incurred date determined for operating and leasing expenditure under the Energy Profits Levy?

Operating expenditure and leasing expenditure are treated as incurred on the date on which payment is actually made. There is no accruals-based recognition for these types of spending. The cash payment date is the sole determining factor, making the timing rule straightforward compared to the capital expenditure provisions.

What are the qualifying date boundaries for investment expenditure under the Energy Profits Levy?

Investment expenditure must be incurred, or treated as incurred, on or after 26 May 2022 and on or before 31 March 2030 to qualify. The start date corresponds to the levy's announcement date. The end date reflects the latest legislative extension under Finance Act 2025. Expenditure outside this window is excluded entirely from levy calculations.

What happens if investment expenditure falls outside the qualifying date window under section 7?

Any investment expenditure incurred before 26 May 2022 or after 31 March 2030 must be left out of account entirely. It cannot increase or reduce a company's levy profits or loss for any qualifying accounting period. This applies regardless of the size of the expenditure, and the exclusion is absolute with no discretionary override.

Energy (Oil and Gas) Profits Levy Act 2022 section 7

When investment expenditure is incurred

Section 7 establishes the rules for determining when investment expenditure is treated as having been incurred for the purposes of the Energy Profits Levy, including the timing rules for different types of expenditure and the date boundaries within which such expenditure must fall.

Capital expenditure timing follows the same rules as section 5 of the Capital Allowances Act 2001, which sets out when capital expenditure is regarded as incurred.
Operating expenditure and leasing expenditure are treated as incurred on the date on which they are actually paid.
Only investment expenditure incurred (or treated as incurred) on or after 26 May 2022 and on or before 31 March 2030 counts towards the levy calculation.
Any investment expenditure falling outside that date window is excluded entirely when working out a company's levy profits or loss for any qualifying accounting period.

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