OT21590 | Investment Allowance: Cluster area allowance

The cluster area allowance was introduced by Finance Act 2015. The legislation is at Schedule 13 FA2015 and Chapter 9 of Part 8 of CTA10.

The cluster area allowance was introduced to help develop high pressure, high temperature projects. It is similar to investment allowance. Income arising from any part of the cluster area (not just income from a particular oil field as with investment allowance) activates the allowance. The Oil and GasAuthority determines if an area can be considered to be a “cluster area”. Further guidance can be found here.

As with investment allowance the cluster area allowance reduces the company’s profits subject to the supplementary charge (see CTA10\S356JG). The allowance is 62.5% of the relievable investment expenditure a company incurs in relation to a cluster area from 3 December 2014 onwards.

See also the guidance on Onshore Allowance at OT21500.