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

Reimbursement by defaulter in respect of certain abandonment expenditure

Section 225T deals with the tax treatment that applies when a defaulting participator in an oil and gas venture reimburses another participator who has already covered the defaulter's share of decommissioning expenditure.

• Applies where a participator has defaulted on their decommissioning obligations and another participator has stepped in to meet those costs
• When the defaulter subsequently reimburses the other participator, a specific tax treatment is triggered for both parties
• The defaulting participator receives tax relief against their ring fence income for the reimbursement payment made
• The participator who originally covered the costs and now receives the reimbursement is treated as having additional ring fence income