OT21568 - Investment Allowance: Interaction with field allowances

The investment allowance legislation was introduced in Finance Act 2015. It replaced the Field Allowances legislation. Transitional rules for companies that have qualified for field allowances (OT21400) are at Paragraphs 7 and 8 of Part 2 Schedule 12 Finance Act 2015.

The intention of the transitional rules is to ensure that a company which holds unactivated or activated field allowances will be no worse off under the investment allowance legislation, by converting that unactivated and activated field allowance to become unactivated or activated investment allowance.

Expenditure incurred on a transitional project (one that exists at the 1 April 2015) is excluded from investment allowance until the investment allowance equals the original field allowance that was given. (S332DA/CTA10 and S332DB/CTA 10)

In order to avoid giving double relief to transitional projects an amount of investment expenditure (the “relevant field threshold”) is excluded from the computation of investment allowance. However, where a project is materially complete (Link) (see CTA10\S332DA(5) and (5A)) any investment expenditure incurred post this materially complete date is not subject to the transitional restrictions. The restrictions and exceptions are at CTA10\S332DA for new fields (see CTA10/S350) and at S332DB CTA10 for additionally developed fields (see CTA10/S349A).