Capital Allowances Act 2001 section 165

General decommissioning expenditure after ceasing ring fence trade

Section 165 provides a mechanism for persons who have ceased a ring fence trade to obtain capital allowances relief for general decommissioning expenditure incurred after cessation, by adding qualifying costs back into the capital allowances pool for the final trading period.

• Where a ring fence trade has ceased and decommissioning expenditure is not otherwise tax-deductible, the relevant decommissioning costs can be allocated back to the appropriate capital allowances pool for the final chargeable period of the trade, thereby increasing a balancing allowance or reducing a balancing charge.
• The post-cessation period runs from the day after the trade ceased until all approved abandonment programmes relating to the relevant plant and machinery have been completed or withdrawn, and the Secretary of State is satisfied no further programmes will be approved.
• Notional accounting periods are created after cessation, each ending on the earliest of 12 months from its start, the former trader's accounting date, or the end of the post-cessation period — and these periods determine when decommissioning expenditure and activity are matched for relief purposes.
• Expenditure that is disproportionate to the decommissioning work actually carried out in a period is restricted to the proportionate amount, though the excess can be carried forward and recognised in a later notional accounting period when the corresponding work takes place.