Finance (No. 2) Act 2023

284 Allowable costs

(1) “Allowable costs” means—

(a) exceptional generation fuel costs of relevant generating stations (see section 285),

(b) exceptional revenue sharing costs in respect of relevant generating stations (see section 286), and

(c) qualifying electricity purchase costs (see subsection (6)).

(2) Allowable costs may only be attributed to a generating undertaking for a qualifying period to the extent—

(a) those costs are fairly and reasonably attributable to generation receipts attributed to the undertaking for the period,

(b) they reflect expenses of the undertaking (or, in the case of an undertaking that is a group, of one or more of its members), and

(c) those costs are not already reflected in the determination of the amounts of those receipts.

(3) Allowable costs are only to be attributed to a generating undertaking if a claim is made for those allowable costs in a company tax return.

In this Part “company tax return” has the same meaning as in Schedule 18 to FA 1998 (see paragraph 3(1) of that Schedule).

(4) Subsection (5) applies to allowable costs of a person (“the cost holder”) to be attributed to a generating undertaking if—

(a) the costs arise as a result of provision made or imposed as between the cost holder and another person by means of a transaction or series of transactions, and

(b) were the cost holder within the charge to corporation tax, the cost holder’s profits and losses would be calculated (as a result of Part 4 of TIOPA 2010) as if the arm's length provision had been made or imposed instead of the provision actually made or imposed.

(5) Where this subsection applies to allowable costs, the amount of those costs is to be determined as if that arm's length provision had been made or imposed instead of the provision it arose as a result of.

(6) In this section “qualifying electricity purchase costs” means costs reasonably incurred in the purchase of electricity in order to comply with the terms of an agreement under which it was expected that a relevant generating station will generate but does not do so.