Income Tax (Trading and Other Income) Act 2005 section 225K

Reduction of expenditure by reference to regional development grant

Section 225K reduces the amount of allowable expenditure on an asset where a regional development grant has already contributed to the cost of that asset, specifically in the context of connected party transactions relating to oil extraction activities.

• Where an asset is acquired in a connected party or non-arm's length transaction, and the original owner received a Northern Ireland regional development grant towards the cost of that asset, the purchaser's allowable expenditure must be reduced by the amount of that grant
• The reduction applies where the grant-funded expenditure qualifies for capital allowances under Part 2 (plant and machinery) or Part 6 (research and development) of the Capital Allowances Act 2001
• The adjustment is made specifically for income tax purposes in relation to oil extraction and related activities, which are treated as a separate trade under section 16(1) of the Act
• A "regional development grant" for these purposes means a Northern Ireland regional development grant as defined in section 534(1) of the Capital Allowances Act 2001