Capital Allowances Act 2001 section 164

General decommissioning expenditure incurred before cessation of ring fence trade

Section 164 allows a person carrying on a ring fence trade (typically oil and gas extraction in the UK or UK Continental Shelf) to elect for a special 100% capital allowance in respect of general decommissioning expenditure incurred before the trade ceases.

• A person carrying on a ring fence trade may elect for a special allowance equal to 100% of qualifying general decommissioning expenditure, provided the expenditure relates to decommissioning carried out in, or linked to, the relevant chargeable period and the plant or machinery has been brought into use for the ring fence trade.
• The election must be made in writing to HMRC within two years of the end of the relevant chargeable period, is irrevocable, and must detail the expenditure, the periods involved, and any amounts received for the remains of demolished plant or machinery.
• If the expenditure claimed is disproportionate to the decommissioning actually carried out in the specified period, the allowance is limited to the proportionate amount, though the excess can be claimed in a later period when the remaining decommissioning takes place.
• Where plant or machinery is demolished, any proceeds received for its remains reduce the total special allowances available, with the reduction applied first against the allowance for the period of receipt, then against earlier periods, and finally against later periods.