OT21562 | Investment Allowance: Meaning of 'investment expenditure'

CTA10\S332BA

Investment allowance is generated when a company carrying on a ring fence trade incurs investment expenditure. Investment expenditure is defined in the legislation as being either:

• Capital expenditure, or

• Any other expenditure that the Treasury may prescribe in regulations

On 29 March 2017 the Investment Allowance and Cluster Area Allowance (Investment Expenditure) Regulations 2017 (SI 2017/292) came into force. These regulations meant that certain types of leasing and operating expenditure incurred on or after 8 October 2015 would become investment expenditure and could therefore generate investment allowance too (see OT21564).

Where the expenditure is only partly incurred for the purposes of oil related activities, or only partly in relation to a particular qualifying oil field, the expenditure is attributed to the activities, or oil field, on a just and reasonable basis.

The amount of allowance generated is 62.5% of the investment expenditure incurred.