OT21560 - Investment Allowance: Requirements to generate allowance

To generate allowance, a company must be a participator in a qualifying oil field (see OT21565). In order for expenditure to generate the allowance, it must be relievable investment expenditure. Investment expenditure is defined at CTA10\S332BA (see OT21562). Investment expenditure is relievable if it is incurred for the purposes of oil related activities, as defined in CTA10\S274. Oil related activities include ‘oil extraction activities’ as defined in CTA10\S272 (see OT21003).

As a general rule decommissioning costs will not qualify as they are not relievable investment expenditure. However, costs of midlife decommissioning may qualify if they are incurred in the course of further extraction activities and meet the statutory definition of oil extraction activities at CTA10\S272.