OT21725 | Energy Profits Levy: Additional expenditure

EPLA22\S2

The levy includes a 29% investment allowance (see the reference to “additional expenditure” in EPLA22\S1(5)(a) and OT21720). The allowance is available where a company incurs investment expenditure in a qualifying accounting period. Where a company incurs such investment expenditure it is treated as if, in addition to that expenditure, an amount equal to 29% of that expenditure is incurred, which is then allowable as a deduction in calculating the levy profit or loss. EPLA22\S2(2) sets out what types of expenditure count as “investment expenditure” in order to qualify for the 29% investment allowance (see OT21730).

The rate of the investment allowance was 80% 26 May 2022 to 31 December 2022 when the levy rate was 25%.

It is similar to the investment allowance for the Supplementary Charge, but there is no need for additional expenditure to be activated by relevant income from the field meaning relief is available in the year of incurring qualifying expenditure and is not field specific. The additional expenditure is used to reduce profits subject to the levy and can create an allowable loss for EPL purposes. There is no requirement to submit a claim. Only investment expenditure incurred during a qualifying accounting period can generate the additional expenditure.

A higher rate of investment allowance is available from 1 January 2023 for investment expenditure that relates to decarbonisation. See OT21750.