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Natural Gas: Finance

Volume 492: debated on Tuesday 12 May 2009

To ask the Chancellor of the Exchequer whether the cost of cushion gas used in gas storage infrastructure is considered to be capital expenditure for taxation purposes; and if he will make a statement. (267119)

[holding answer 26 March 2009]: Cushion gas may be described as the volume of gas intended for long-term use in a gas storage facility, necessary to maintain pressure and to enable redelivery of the stored gas. As such, it is not acquired with a view to being re-sold as an incident of the storage trade, but with a view to being retained long-term as a fixed asset of the business. In those circumstances, the cost of acquiring it is normally capital expenditure for taxation purposes. However, the answer can depend on the particular facts of the case so if, for example, there is systematic evidence of the buying and selling of recoverable cushion gas (perhaps allied to an accounting treatment of the gas as trading stock) this may point to the expenditure being revenue expenditure for tax purposes.