OT21755 | Energy Profits Levy: Oil-related activities 

The only expenditure that is investment expenditure is expenditure that is incurred for the purposes of oil-related activities. CTA10\S274 defines oil related activities as:

• oil extraction activities and

• activities consisting of the acquisition, enjoyment or exploitation of oil rights

Where investment expenditure is incurred only partly for oil-related activities and partly for other purposes, the expenditure is to be attributed to the oil-related activities on a just and reasonable basis (EPLA22\S2(4)).

Example

Company X acquires a capital asset for £10 million on 1 October 2023. The asset is only partly used for oil-related activities. Company X calculates that the new asset is to be used 50% of the time for oil-related activities. Company X is treated as incurring additional expenditure of £1.45 million (£10m x 50% = £5m x 29% = £1.45m).