Taxes Consolidation Act 1997 section 693

Exploration expenditure: allowances and charges

Section 693 provides a 100% allowance for exploration expenditure incurred in carrying on a petroleum trade, together with balancing charge provisions where assets representing that expenditure are disposed of.

• A person carrying on a petroleum trade receives a full (100%) allowance for exploration expenditure in the chargeable period in which it is incurred, provided the expenditure has not been met by another person.
• Where assets representing exploration expenditure are disposed of, a balancing charge arises on the net disposal proceeds, capped at the allowances previously given; destroyed assets are treated as disposed of immediately before destruction.
• A purchaser of assets representing exploration expenditure connected with a relevant field may claim an allowance equal to the lesser of the original exploration expenditure and the price paid for the assets.
• Pre-trading exploration expenditure is deemed incurred on the first day of trading, but abortive expenditure on an area that is not a relevant field is excluded if incurred more than 25 years before the trade begins.

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