Commentary

D7.924B Cluster area allowance

Corporate tax
Corporate tax | Commentary

D7.924B Cluster area allowance

Corporate tax | Commentary

D7.924B Cluster area allowance

The cluster area allowance was introduced by Finance Act 20151 and applies in relation to eligible investment expenditure incurred on or after 3 December 20142. It operates in a broadly similar manner to investment allowance in that eligible expenditure (ie capital expenditure or such other amount that may be specified in regulations3) in relation to a 'cluster area' generates an allowance equal to 62.5% of the expenditure, and the allowance is set off against the supplementary charge profits of the company once activated. The key difference between cluster area allowance and investment allowance is that the former allowance is activated by income from the cluster area, as opposed to the field.

Where a company is entitled to allowances under these provisions, the onshore allowance (D7.924) and the investment allowance (D7.924A) it may chose the order in which the relieving provisions are to be applied4.

Cluster area

A 'cluster area' is an offshore area defined as such by the Oil and Gas Authority, but does not include any previously authorised oil fields5. A previously authorised oil field is a field that was authorised for development6 before the cluster area

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