CW Energy LLP

Investment Allowance

Changes in Activation rules: Tariff receipts

Secondary legislation has now been brought into effect to allow tariff receipts to be included within relevant income for the purposes of determining the level of investment allowance or cluster allowance that can be activated.

Tariff income activates investment allowance or cluster allowance for the field or cluster to which the tariffs are ‘attributable’.  Note the rules for attribution do not follow the PRT rule concept of a chargeable field so if a qualifying asset which generates tariff income is used by the owner of a number of fields, the income should be apportioned on a just and reasonable basis between those fields.

The rules have retrospective effect and apply to accounting periods beginning on or after 16 September 2016.  Companies with a December year end who have recently submitted their 2017 returns and have a supplementary charge liability or likely to have one in the foreseeable future should review the position to determine whether this change could generate a benefit.