Oil Taxation Act 1975

• (2) In this Part of this Act any reference to the use of an asset in connection with an oil field is a reference to its use in connection with that field for one or more of the purposes mentioned in section 3(1) of this Act (excluding section 3(1)(b)).

• (3) In this Part of this Act any reference (however worded) to the doing of anything in a chargeable period in connection with an oil field or with oil won from an oil field shall, as regards the first chargeable period for any oil field, be construed as including the doing of that thing in connection with the area of the field as subsequently determined under Schedule 1 to this Act or, as the case may be, with oil won from that area.

• (4) In so far as a person is a participator in an oil field by virtue of a licence under the Petroleum (Production) Act (Northern Ireland) 1964, references in this Part of this Act to the Secretary of State or the OGA (except references in Schedule 1) shall be construed in his case as references to the Department of Commerce for Northern Ireland.

Part II

Treatment of oil extraction activities etc. for purposes of income tax and corporation tax

13–19

Valuation of oil disposed of or appropriated in certain circumstances

14

• (1) Where a person disposes of any oil in circumstances such that the market value of that oil at a particular time falls to be taken into account under section 2 of this Act (otherwise than by virtue of paragraph 6 of Schedule 3 thereto) in computing for the purposes of petroleum revenue tax the assessable profit or allowable loss accruing to him in any chargeable period from an oil field (or would so fall but for section 10 of this Act), then for all purposes of income tax, and for the purposes of the charge of corporation tax on income, the disposal of the oil and its acquisition by the person to whom it was disposed of shall be treated as having been for a consideration equal to the market value of the oil as so taken into account under section 2 of this Act (or as would have been so taken into account under that section but for section 10 of this Act).

• (2) Where a person makes a relevant appropriation of any oil without disposing of it and does so in circumstances such that the market value of that oil at a particular time falls to be taken into account under section 2 of this Act in computing for the purposes of petroleum revenue tax the assessable profit or allowable loss accruing to him in any chargeable period from an oil field (or would so fall but for section 10 of this Act), then for all purposes of income tax, and for the purposes of the charge of corporation tax on income, he shall be treated as having, at the time of the appropriation—

• (i) sold the oil in the course of the separate trade consisting of activities falling within section 13(1)(a) or (b) of this Act; and

• (ii) bought it in the course of the separate trade consisting of activities not so falling,

and as having so sold and bought it at a price equal to its market value as so taken into account under section 2 of this Act (or as would have been so taken into account under that section but for section 10 of this Act).

In this subsection " relevant appropriation " has the meaning given in section 12(1) of this Act.

• (3) Where a person disposes otherwise than in a sale at arm's length (as defined in paragraph 1 of Schedule 3 to this Act) of oil acquired by him in the course of oil extraction activities carried on by him or by virtue of oil rights held by him, then, if subsection (1) above does not apply in relation to the disposal, the following subsection shall apply in relation to it.

• (4) For all purposes of income tax, and for the purposes of the charge of corporation tax on income, the disposal of the oil and its acquisition by the person to whom it was disposed of shall be treated as having been for a consideration equal to the market value of the oil at the material time in the calendar month in which the disposal was made.

• (5) For the purposes of the preceding subsection "material time" and " calendar month" have the meaning given by paragraph 3(2) of Schedule 3 to this Act; and paragraph 2 of Schedule 3 to this Act (definition of market value of oil) shall apply for the purposes of the preceding subsection as it applies for purposes of Part I of this Act, but with the following modifications, that is to say—

• (a) for sub-paragraph (2)(c) there shall be substituted—

(c) the contract is for the sale of the whole quantity of oil whose market value falls to be ascertained for the purposes of section 14(4) of this Act, and of no other oil.

; and

• (b) sub-paragraphs (3) and (4) shall be omitted.

• (6) Section 485 of the Taxes Act (sales etc. at undervalue or overvalue) shall not apply in relation to any transaction in relation to which subsection (1) or (4) above applies.

Oil extraction activities etc.: charges on income

15

• (1) Section 248 of the Taxes Act (allowance of charges on income) shall have effect subject to the following provisions of this section.

• (2) Interest paid by a company shall not be allowable under the said section 248 as a deduction against that part of the profits of the company which consists of income arising from oil extraction activities or from oil rights except—

• (a) to the extent that it was payable in respect of money borrowed by the company which is shown to have been used to meet expenditure incurred by the company in carrying on oil extraction activities or in acquiring oil rights otherwise than from a connected person or to have been appropriated to meeting expenditure to be so incurred by the company ; and

• (b) in the case of interest paid by the company to a company associated with it, to the extent that (subject always to the preceding paragraph) the rate at which it was payable did not exceed what, having regard to all the terms on which the money was borrowed and the standing of the borrower, was a reasonable commercial rate.

Section 533 of the Taxes Act (connected persons), shall apply for the purposes of this subsection.

• (3) Where a company pays to a company associated with it a charge on income not consisting of a payment of interest, the charge shall not be allowable to any extent under the said section 248 against that part of the profits of the first-mentioned company which consists of income arising from oil extraction activities or from oil rights.

• (4) The preceding provisions of this section—

• (a) shall have effect as regards accounting periods beginning after 11th July 1974 ; and

• (b) in the case of an accounting period beginning on or before and ending after that date, shall have effect as regards the allowance of interest paid and other charges on income against income attributable to the part of the period falling after that date ;

and there shall be made all such apportionments as are necessary to give effect to paragraph (b) above.

Oil extraction activities etc.: restriction on setting advance corporation tax against income therefrom

16

• (1) Section 85 of the Finance Act 1972 (payments of advance corporation tax to be set against company's liability to corporation tax on its income) shall, as regards any distribution made by a company after 19th November 1974, have effect subject to the following provisions of this section.

• (2) Where advance corporation tax is paid by a company (" the distributing company") in respect of any distribution made by it to a company associated with it and resident in the United Kingdom—

• (a) that advance corporation tax shall not be set against the distributing company's liability to corporation tax on any income of the distributing company arising from oil extraction activities or from oil rights; and

• (b) if the benefit of any amount of that advance corporation tax is surrendered under section 92 of the Finance Act 1972 to a subsidiary of the distributing company,

the corresponding amount of advance corporation tax which under that section the subsidiary is treated for the purposes of the said section 85 as having paid shall not be set against the subsidiary's liability to corporation tax on any income of the subsidiary arising from such activities or from oil rights.

• (3) Where in the case of any accounting period of a company there is an amount of advance corporation tax which because of subsection (2) above is not available to be set against the company's liability to corporation tax for that period on income of the company arising from oil extraction activities or from oil rights, subsection (2) of the said section 85 (limit on amount of advance corporation tax to be set against liability to corporation tax under subsection (1) of that section) shall as regards that period have effect as if the reference to the company's income charged to corporation tax for that period were a reference to the company's income so charged exclusive of income so arising.

Corporation tax: deduction of petroleum revenue tax in computing income

17

• (1) Where a participator in an oil field has paid any petroleum revenue tax with which he was chargeable for a chargeable period, then, in computing for corporation tax the amount of his income arising in the relevant accounting period from oil extraction activities or oil rights, there shall be deducted an amount equal to that petroleum revenue tax ; and there shall be made all such adjustments of assessments to corporation tax as are required in order to give effect to this subsection.

For the purposes of this subsection the relevant accounting period, in relation to any petroleum revenue tax paid by a company, is the accounting period of the company in or at the end of which the chargeable period for which that tax was charged ends.

• (2) If some or all of the petroleum revenue tax in respect of which a deduction has been made under subsection (1) above is subsequently repaid, that deduction shall be reduced or extinguished accordingly; and any additional assessment to corporation tax required in order to give effect to this subsection may be made at any time not later than six years after the end of the accounting period in which the first-mentioned tax was repaid.

• (3) Where, because of a deduction made under subsection (1) above in computing for corporation tax the amount of a company's income of any kind, the amount of advance corporation tax which can be set against the company's liability to corporation tax for an accounting period is less than the amount of advance corporation tax which could have been set against that liability if the deduction had not been made, then, if a claim in that behalf is made by the company not later than two years after the end of that accounting period, an amount of advance corporation tax equal to the difference shall be repaid to the company.

• (4) In this section the expressions " chargeable period ", " oil field " and " participator " have the same meaning as in Part I of this Act.

Interest on tax overpaid to be disregarded in computing income

18

• (1) Where any amount of petroleum revenue tax paid by a participator in an oil field is, under any provision of Part I of this Act, repaid to him with interest, the amount of the interest paid to him shall be disregarded in computing the amount of his income for the purposes of corporation tax.

• (2) In this section " oil field " and " participator " have the same meaning as in Part I of this Act.

Interpretation of Part II

19

• (1) In this Part of this Act—

• " oil " means any substance won or capable of being won under the authority of a licence granted under either the Petroleum (Production) Act 1934 or the Petroleum (Production) Act (Northern Ireland) 1964, other than methane gas won in the course of operations for making and keeping mines safe;

• " oil extraction activities " means any activities of a person— in searching for oil in the United Kingdom or a designated area or causing such searching to be carried out for him ; or in extracting or causing to be extracted for him oil at any place in the United Kingdom or a designated area under rights authorising the extraction and held by him or, if the person in question is a company, by the company or a company associated with it; or in transporting or causing to be transported for him as far as dry land in the United Kingdom oil extracted at any such place not on dry land under rights authorising the extraction and held as aforesaid ; or in effecting or causing to be effected for him the initial treatment or initial storage of oil won from any oil field under rights authorising its extraction and held as aforesaid ;

• " oil rights " means rights to oil to be extracted at any place in the United Kingdom or a designated area, or to interests in or to the benefit of such oil.

• (2) For the purposes of (d) in subsection (1) above—

• (a) the expressions " oil field " and " initial treatment" have the same meaning as in Part I of this Act; and

• (b) the definition of " initial storage " in section 12(1) above shall apply but, in its application for those purposes in relation to the person mentioned in (d) in subsection (1) above and to oil won from any one oil field, shall have effect as if the reference to the maximum daily production rate of oil for the field as there mentioned were a reference to that person's share of that maximum daily production rate, that is to say a share thereof proportionate to his share of the oil won from that field.

• (3) For the purposes of this Part of this Act two companies are associated with one another if—

• (a) one is a 51 per cent, subsidiary of the other ;

• (b) each is a 51 per cent, subsidiary of a third company ; or

• (c) one is owned by a consortium of which the other is a member;

and section 258(8) of the Taxes Act shall apply for the purposes of paragraph (c) above.

Part III — Miscellaneous and General

Modification of certain provisions in relation to petroleum companies

20

Citation, interpretation and construction

21

• (1) This Act may be cited as the Oil Taxation Act 1975.

• (2) In this Act—

• “the Board” means the Commissioners for Her Majesty's Revenue and Customs;

• “CTA 2010” means the Corporation Tax Act 2010;

• “designated area” means an area designated by Order in Council under section 1(7) of the Continental Shelf Act 1964;

• . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (3) Parts II and III of this Act, so far as they relate to income tax, shall be construed as one with the Income Tax Acts and, so far as they relate to corporation tax, shall be construed as one with the Corporation Tax Acts.

• (4) Except so far as the context otherwise requires, any reference in this Act to any enactment shall be construed as a reference to that enactment as amended, and as including a reference to that enactment as applied, by or under any other enactment, including this Act.

• (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SCHEDULE 1

1

• (1) For the purposes of this Part of this Act an oil field is any area which the appropriate authority may determine to be an oil field, being an area of which every part is, or is part of, a licensed area.

• (2) For the purposes of this Schedule the appropriate authority, in relation to any area—

• (a) is the OGA if the area is such that licences can be granted by the OGA for all of it under Part I of the Petroleum Act 1998;

• (aa) is the Scottish Ministers if the area is such that licences can be granted by the Scottish Ministers for all of it under Part 1 of the Petroleum Act 1998;

• (ab) is the OGA and the Scottish Ministers acting jointly if the area is such that licences can be granted for part of it by the OGA and for part of it by the Scottish Ministers;

• (ac) is the Welsh Ministers if the area is such that licences can be granted by the Welsh Ministers for all of it under Part 1 of the Petroleum Act 1998;

• (ad) is the OGA and the Welsh Ministers acting jointly if the area is such that licences can be granted for part of it by the OGA and for part of it by the Welsh Ministers;

• (b) is the Department of Commerce for Northern Ireland if the area is such that licences can be granted for all of it under the Petroleum (Production) Act (Northern Ireland) 1964; and

• (c) is the OGA and that Department acting jointly if the area is such that licences can be granted for part of it under one and for part of it under the other of those Acts;

and any reference in this Schedule to the making of representations to the appropriate authority is, in a case falling within (c) above, a reference to the making of them to either the OGA or the said Department.

2

Before determining an area to be an oil field the appropriate authority—

• (a) shall give notice in writing of the proposed determination to every person who is a licensee in respect of a licensed area wholly or partly included in that area and to any other licensee whose interests appear to the authority to be affected; and

• (b) shall consider any representations in writing which a person to whom a notice under this paragraph has been given may make to the authority within sixty days of receiving the notice,

and the determination may be made either as proposed or with such modifications as appear to the authority to be appropriate after considering any representations made to the authority in accordance with this paragraph.

3

A determination under this Schedule shall be in such form as the appropriate authority thinks fit and shall for purposes of identification assign to the field to which it relates a distinguishing number or other designation.

4

The appropriate authority shall give notice of any determination made by the authority under this Schedule to each of the persons to whom notice of the proposed determination was given.

5

A determination under this Schedule may from time to time be varied by a new determination thereunder made by the appropriate authority, and paragraphs 2 to 4 above shall apply to any such new determination.

SCHEDULE 2

Management of tax

1

• (1) The tax shall be under the care and management of the Board; and the provisions of the Taxes Management Act 1970 specified in the first column of the following Table shall apply in relation to the tax as they apply in relation to a tax within the meaning of that Act, subject to any modifications specified in the second column of that Table and with the substitution, for references to Part IX of that Act or to the Taxes Acts, of references to this Part of this Act and, for references to chargeable periods within the meaning of that Act, of references to chargeable periods within the meaning of this Part of this Act.

Provisions applied	Modifications
Section	Section
1(3)
. . .
33	. . .
	In subsection (3), after “assessments made on” insert “ or determinations made in relation to ”.
	In subsection (5), for the words following “profits” substitute “ means assessable profits. ”
34
36	. . .
	“ For the purposes of this section any fraud, wilful default or neglect committed at any time by a responsible person for an oil field in connection with or in relation to the tax shall be treated as having been committed on behalf of each of the participators in that field at that time. ”
47C	—
. . .	. . .
48
49...
50(1)-(5)	. . ..
51	. . .
52	. . .
. . .
56	. . .
Section 56	-
. . .	. . .
. . .	. . .
. . .	. . .
. . .	. . .
. . .	. . .
60	In subsection (1), omit the words following “charged therewith”.
61	In subsection (1), omit the words from “distrain upon” to “is charged or”.
62(1)	Omit “or which are payable for the year in which the seizure is made” and for “one year” and “one whole year” substitute “ two chargeable periods ”.
(2)	For “one whole year” substitute “ two chargeable periods ”.
63
64(1)	For “one year” and “one whole year” substitute “ two chargeable periods ”.
(2)	For “one whole year” substitute “ two chargeable periods ”.
66
67
68
69	In paragraph (a), substitute a reference to section 68 as applied by this paragraph for the reference to the sections there specified.
. . .	. . .
89(2)	For the reference to the rate or rates of interest prescribed by subsection (1) of that section substitute a reference to the rate of interest mentioned in paragraph 15 of this Schedule.
(3)
90
98	. . .
. . .
Section 100C	In subsection (1) omit the words after “penalty” .
. . .	. . .
. . .	. . .
. . .
. . .
101	For the reference to income or chargeable gains substitute a reference to assessable profits.
102
Section103(1)	For the words from the beginning to “court -” substitute “ Where the amount of a penalty is to be ascertained by reference to tax payable by a person for any period , proceedings for the penalty may be commenced before the tribunal - ”
(4)	For the words from the beginning to “court,”substitute “ Proceedings for a penalty to which subsection (1) above does not apply may be commenced before the tribunal . ”
104
105
107(1)–(3)
108	In subsection (2), for the words from the beginning to “Acts” substitute “ The tax chargeable ”.
112	In subsection (1), after “assessment to tax” and “the assessment” insert “ or determination ” and after “duplicate of assessment to tax” and “duplicate of assessment” insert “ or of determination ”.
113(1A)
(3)	After “assessment” insert “ determination ” and after “notice of assessment” insert “ notice of determination ”.
114	After “assessment” wherever occurring insert “ or determination ”.
115(1)–(3)
118(1)
(2)

• (2) Any expression to which a meaning is given in this Part of this Act which is used in a provision of the Taxes Management Act 1970 applied by this paragraph shall, in that provision as so applied, have the same meaning as in this Part of this Act.

Returns by participators

2

• (1) Every participator in a taxable field shall, for each chargeable period, prepare and, within two months after the end of the period or within such longer period as the Board may allow, deliver to the Board a return complying with the following provisions of this paragraph; but nothing in this sub-paragraph shall require a participator to deliver a return under this paragraph before 31st August 1975.

• (2) A return under this paragraph for a chargeable period shall give the following information in relation to oil which is or was included in the participator’s share of any oil won from the taxable field (whether or not in that period), that is to say—

• (a) in the case of each delivery (other than one made before 13th November 1974) in the period of oil disposed of by him crude (other than oil delivered as mentioned in (c) of this sub-paragraph), the return shall—

• (i) state the quantity of oil delivered;

• (ii) state the person to whom the oil was disposed of;

• (iii) in the case of oil disposed of in a sale at arm’s length, state the price received or receivable for the oil or, in the case of oil disposed of otherwise than in a sale at arm’s length, state the market value of the oil at the material time as determined in accordance with Schedule 3 to this Act in the case of the delivery or (in the case of light gases) the market value as determined in accordance with paragraph 3A of Schedule 3 to this Act; and

• (iv) contain such other particulars of or relating to the disposal as the Board may prescribe;

• (b) in the case of each relevant appropriation of crude oil (other than one made before 13th November 1974) in the period (not being oil disposed of by him), the return shall—

• (i) state the quantity of oil appropriated;

• (ii) state the market value of the oil at the material time as determined in accordance with Schedule 3 to this Act in the case of the appropriation or (in the case of light gases) the market value as determined in accordance with paragraph 3A of Schedule 3 to this Act; and

• (iii) contain such other particulars of or relating to the appropriation as the Board may prescribe;

• (c) in the case of crude oil delivered to the OGA in the period under the terms of a licence granted under Part I of the Petroleum Act 1998, the return shall state the total quantity of the oil;

• (d) in the case of crude oil which, at the end of the period, has either not been disposed of and not relevantly appropriated or has been disposed of but not delivered, the return shall—

• (i) state the quantity of the oil;

• (ii) state the market value of the oil on the last business day of the period; and

• (iii) contain such other particulars relating to the oil as the Board may prescribe.

• (2A) Every participator in a taxable field shall, in the first return under this paragraph which he makes for that field, state whether any and, if any, how much expenditure to which section 5A or section 5B of this Act applies and which relates to, or to a licence for, any part of the field has been claimed under Schedule 7 to this Act—

• (a) by him, or

• (b) by a company associated with him in respect of that expenditure, or

• (c) if he or such a company is the new participator, within the meaning of Schedule 17 to the Finance Act 1980, by the old participator, within the meaning of that Schedule, or by a company associated with him in respect of that expenditure,

and subsection (7) of section 5 of this Act applies for the purposes of this sub-paragraph as it applies for the purposes of that section.

• (3) A return under this paragraph for a chargeable period shall state—

• (a) the amount of royalty payable by the participator for that period in respect of his share of oil won from the field as shown in the return or returns made by him to the Secretary of State under the relevant licence or licences;

• (b) the amount of royalty paid by the participator in that period in respect of that share;

• (c) the amount of any royalty paid under any relevant licence in respect of the field which was repaid to the participator in that period; and

• (d) the amount of any periodic payment made by the participator to the OGA in that period under each relevant licence otherwise than by way of royalty.

• (3A) A return under this paragraph for a chargeable period shall—

• (a) state the amount (if any) which, in the case of the participator, is to be brought into account for that period in accordance with section 2(5)(e) of this Act;

• (b) contain such particulars as the Board may prescribe (whether before or after the passing of the Finance Act 1987) with respect to any nominated transaction under Schedule 10 to that Act—

• (i) the effective volume of which forms part of the participator’s aggregate effective volume (construing those terms in accordance with that Schedule) for any calendar month comprised in that chargeable period; and

• (ii) which has not led to deliveries of oil or relevant appropriations of which particulars are included in the return by virtue of sub-paragraph (2) above; and

• (c) contain such other particulars as the Board may prescribe (as mentioned above) in connection with the application of section 61 of and Schedule 10 to the Finance Act 1987.

• (4) A return under this paragraph shall be in such form as the Board may prescribe and shall include a declaration that the return is correct and complete.

• (5) The power of the Board to allow an extension of time under sub-paragraph (1) above shall include power—

• (a) to allow an extension for an indefinite period; and

• (b) to provide for the period of any extension to end at such time as may be stipulated in a notice given by the Board.

3

• (1) If a participator fails to deliver a return within the time allowed for doing so under paragraph 2(1) above he shall be liable, subject to sub-paragraph (3) below—

• (a) to a penalty not exceeding, except in the case mentioned in sub-paragraph (2) below, £500; and

• (b) if the failure continues after it has been declared by the court or the tribunal before which proceedings for the penalty have been commenced, to a further penalty not exceeding £100 for each day on which the failure so continues.

• (2) If the failure continues after the end of six months from the time by which the return ought to have been delivered, the penalty under sub-paragraph (1)(a) above shall be an amount not exceeding the aggregate of £500 and the total amount of the tax with which the participator is charged for the chargeable period in question.

• (3) Except in the case mentioned in sub-paragraph (2) above, the participator shall not be liable to any penalty incurred under this paragraph for failure to deliver a return if the failure is remedied before proceedings for the recovery of the penalty are commenced.

Appointment of responsible person for each oil field

4

• (1) For each oil field a body corporate or partnership shall be appointed in accordance with this paragraph as the responsible person for that field to perform, in relation to the field, any functions conferred on it as such by this Part of this Act; and the body or partnership which for the time being holds that appointment is in this Part of this Act referred to as “the responsible person”.

• (2) No body corporate shall be eligible for appointment as the responsible person for a taxable field unless it is resident in the United Kingdom, and no partnership shall be so eligible unless all its members are resident there.

• (3) The participators in a taxable field shall, by notice in writing to the Board within the initial period, nominate a body corporate or a partnership for appointment as the responsible person for that oil field and, if the Board approve the nomination, the Board shall appoint that body or partnership as the responsible person and give it notice that it has been so appointed.

• (4) If—

• (a) the participators have made no nomination within the initial period; or

• (b) the Board do not appoint the body or partnership nominated under sub-paragraph (3) above,

the Board shall appoint one of the participators in the taxable field as the responsible person for the field and shall give notice to that participator that he has been so appointed.

• (5) For the purposes of the preceding provisions of this paragraph, the initial period is the period of thirty days beginning with the latest date on which notice of determination of the taxable field is given to any of the participators under paragraph 4 of Schedule 1 to this Act.

• (6) The Board may at any time, on the application of all the participators in a taxable field, appoint a body corporate or partnership nominated by the participators as the responsible person for that field in place of the body corporate or partnership which is the responsible person at that time, and shall give the body or partnership so appointed notice that it has been so appointed.

• (7) The Board may, by notice in writing to the body corporate or partnership which is for the time being the responsible person for a taxable field, revoke the appointment of that body or partnership as the responsible person for that field; and where they do so the Board shall appoint one of the participators in the taxable field as the responsible person for that field and shall give notice to the participator that he has been so appointed.

• (8) In this paragraph “participator”, in relation to a taxable field, means a person who is a licensee in respect of any licensed area wholly or partly included in the field.

Returns by the responsible person

5

• (1) The responsible person for a taxable fieldshall, for each chargeable period, prepare and, within one month after the end of the period or within such longer period as the Board may allow, deliver to the Board a return for that period complying with sub-paragraphs (2) and (3) below; but nothing in this sub-paragraph shall require the responsible person to deliver a return under this paragraph before 31st July 1975.

• (2) A return under this paragraph for a chargeable period shall—

• (a) state the quantity of oil won and saved from the taxable field during the period;

• (b) state the respective interests of the participators in the field in that oil;

• (c) state what, in accordance with those interests, is each participator’s share of that oil; and

• (d) contain such other particulars of or relating to the field as the Board may require.

• (2A) The reference in sub-paragraph (2)(d) above to particulars of or relating to the field includes a reference to particulars required for determining the amount by which any qualifying tariff receipts, within the meaning of section 9 of the Oil Taxation Act 1983, are to be treated as reduced by virtue of that section.

• (2B) If in any chargeable period oil won from the taxable field is mixed as mentioned in section 63 of the Finance Act 1987 so as to give rise to blended oil, within the meaning of that section, then, as respects that chargeable period, for paragraph (a) of sub-paragraph (2) above there shall be substituted the following paragraph—

(a) state the total of the shares of the participators in the taxable field of the oil won from the field during the period less so much of the oil won from the field as is not saved

.

• (3) A return under this paragraph shall be in such form as the Board may prescribe and shall include a declaration that the return is correct and complete.

• (4) The power of the Board to allow an extension of time under sub-paragraph (1) above shall include power—

• (a) to allow an extension for an indefinite period; and

• (b) to provide for the period of any extension to end at such time as may be stipulated in a notice given by the Board.

6

• (1) If the responsible person fails to deliver a return within the time allowed for doing so under paragraph 5(1) above he shall be liable—

• (a) to a penalty not exceeding £500, and

• (b) if the failure continues after it has been declared by the court or the tribunal before which proceedings for the penalty have been commenced, to a further penalty not exceeding £100 for each day on which the failure so continues.

• (2) The responsible person shall not be liable to any penalty incurred under sub-paragraph (1) above for failure to deliver a return if the failure is remedied before proceedings for the recovery of the penalty are commenced.

Production of accounts, books and other information

7

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Incorrect returns, accounts, etc.

8

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Assessments to tax and determinations of loss, etc.

10

• (1) Where it appears to the Board that, in accordance with the provisions of this Part of this Act, an assessable profit has accrued to a participator in a chargeable period from a taxable field, they shall make an assessment to tax on the participator and shall give him notice of the assessment.

• (1A) An assessment under sub-paragraph (1) may be made at any time not more than 4 years after the end of the chargeable period to which it relates (subject to paragraphs 12A , 12B and 13E ).

• (2) Where it appears to the Board that, in accordance with those provisions, an allowable loss has accrued to a participator in a chargeable period from a taxable field, they shall make a determination that the loss is allowable to the participator and shall give him notice of the determination.

• (3) Where it appears to the Board that, in accordance with those provisions, neither an assessable profit nor an allowable loss has accrued to a participator in a chargeable period, they shall make a determination to that effect and shall give him notice of the determination.

• (4) A notice of assessment for a chargeable period shall state the amount of any allowable losses which, in accordance with those provisions, have been set against the assessable profit for that period.

• (5) A notice of assessment or determination shall state that the participator may appeal against the assessment or determination in accordance with paragraph 14 below.

• (6) After the service of the notice of assessment or the notice of determination the assessment or determination, as the case may be, shall not be altered except in accordance with the express provisions of this Part of this Act (including the provisions applied by paragraph 1 above).

11

• (1) Where a participator has under paragraph 2 above delivered to the Board a return for a chargeable period and the Board are satisfied that the information given in the return is correct in so far as it is material for the purpose of computing his assessable profit or allowable loss (if any) for that period, the Board shall (in so far as the computation falls to be made by reference to the matters dealt with in the return) make the assessment or determination under paragraph 10 above in accordance with the return.

• (2) Where the Board are not so satisfied in relation to a participator’s return or a participator fails to deliver to the Board a return for a chargeable period as required by paragraph 2 above, the Board shall, in so far as the computation of his assessable profit or allowable loss (if any) for that period falls to be made by reference to the matters which were dealt with in the return or, as the case may be, ought to have been dealt with in a return, make the assessment or determination under paragraph 10 above to the best of their judgment.

• (3) Nothing in sub-paragraph (2) above or in paragraph 5 above shall be taken, in a case where the participator has delivered a return as to which the Board are not satisfied as mentioned in sub-paragraph (1) above, to prevent the Board from basing their assessment or determination on the participator’s having had an interest in oil won and saved from the field different from that on which he based his return.

12

• (1) Where it appears to the Board—

• (a) that the assessable profit charged to tax by or stated in an assessment ought to be or to have been larger or smaller; or

• (b) that the allowable loss stated in an assessment or a determination of loss ought to be or to have been larger or smaller; or

• (c) that, where they made a determination that neither an assessable profit nor an allowable loss accrued in a chargeable period, they ought to have made an assessment to tax or a determination of loss for that period, or

• (d) that for any chargeable period they ought to have made an assessment to tax instead of a determination of loss or a determination of loss instead of an assessment to tax;

the Board may make such assessments or determinations or such amendments of assessments or determinations as may be necessary; and where the Board exercise any of their powers under this paragraph in relation to a chargeable period, they may make such assessments or determinations or amendments of assessments or determinations for other chargeable periods as may be necessary in consequence of the exercise of those powersand “taxable field” and “non-taxable field” have the same meaning as in Part III of the Finance Act 1993.

• (1A) An assessment (or an amendment of an assessment) under sub-paragraph (1) may be made at any time not more than 4 years after the end of the chargeable period to which the assessment relates (subject to sub-paragraph (1B) and paragraphs 12A and 12B).

• (1B) The time limits in sub-paragraph (1A) and paragraphs 12A and 12B do not apply to an amendment of an assessment where the amendment is made in consequence (directly or indirectly) of—

• (a) the granting of relief under section 7(2) or (3) to any participator for allowable losses accruing in any chargeable period, ...

• (aa) a claim under paragraph 13A (see paragraph 13E), or

• (b) a notice of variation served under paragraph 9 of Schedule 5 on any responsible person in respect of a claim for any claim period.

• (2) Where under sub-paragraph (1) above it appears to the Board that the assessable profit for a chargeable period ought to have been larger and that the deficiency resulted from an excessive allowable loss accruing in a subsequent period having been set against the profit for that period, the Board may ... make a further assessment by virtue of sub-paragraph (1) above at any time not later than 4 years after the end of the chargeable period in which the allowable loss accrued (subject to paragraphs 12A and 12B) .

• (3) Where under this paragraph the Board make an assessment or determination or amend an assessment or determination they shall give notice thereof to the participator concerned; and sub-paragraphs (4), (5) and (6) of paragraph 10 above shall apply in relation to any such assessment, determination or amendment as they apply in relation to an assessment or determination under that paragraph.

Payment of tax

13

Subject to paragraph 14 below, the tax charged in an assessment made on a participator for any chargeable period and payable shall be due within six months after the end of that chargeable period or, if later, thirty days after the date of issue of the notice of assessment; but no tax shall be payable by virtue of this paragraph before 30th April 1976.

Appeals

14

• (1) A participator may appeal ... against an assessment or determination or an amendment of an assessment or determination made on or in relation to him by notice of appeal in writing given to HMRC within thirty days after the date of issue of the notice of assessment or determination or of the notice of the amendment.

• (1A) A participator who has made a claim under paragraph 13A may appeal from the decision on the claim by notice in writing given to HMRC within 30 days after the date of issue of the notice of the decision.

• (2) The notice of appeal must specify the grounds of appeal.

• (3) A participator who has given notice of appeal under sub-paragraph (1) above against an assessment charging him with any tax for a chargeable period may, if he delivered a return for that period as required by paragraph 2 above, withhold, until the determination or abandonment of the appeal, so much of the tax charged in the assessment as is the smaller of—

• (a) the amount of the tax so charged; and

• (b) tax on the difference between—

• (i) the aggregate of the consideration received or receivable for oil as stated in the participator’s return in pursuance of sub-paragraph (2) of that paragraph and, subject to sub-paragraph (4) below, the market value of oil as so stated; and

• (ii) the aggregate of the corresponding consideration and value as included in the assessment.

• (4) Subject to sub-paragraph (5) below, where the market value of all the oil for which a market value is stated in the participator’s return is, as stated in that return, less than the value which is produced for that oil by applying to it the average price mentioned in sub-paragraph (6) below, sub-paragraph (3) above shall have effect as if, for the reference to the market value of oil as so stated, there were substituted a reference to the value which is so produced for that oil.

• (5) The comparison of values and the substitution required by sub-paragraph (4) above shall, in the case of an appeal by a participator whose return relates both to gas and to other oil, be made separately for the gas and for the other oil.

• (6) The average price referred to in sub-paragraph (4) above is the average price at which all oil included in the relevant returns as oil delivered in the period covered by the returns and disposed of in sales at arm’s length was so disposed of.

• (7) The relevant returns for the purposes of sub-paragraph (6) above are all the returns of all the participators in all oil fields which—

• (a) were made for the chargeable period preceding that to which the appeal relates; and

• (b) were delivered before the end of the chargeable period to which the appeal relates.

• (8) The participator may at any time, if HMRC do not object to his doing so, abandon an appeal instituted by him; and for this purpose he shall notify his desire to do so to HMRC who may, within thirty days after being so notified, object by notice in writing to the participator.

• (9) Where, at any time between—

• (a) the giving of a notice of appeal against the assessment determination or amendment or from a decision of HMRC on a claim under paragraph 13A , and

• (b) the determination of the appeal by the tribunal,

HMRC and the participator agree on how the assessment, determination, amendment or decision should be varied or on what assessment or determination should be substituted in relation to the chargeable period in question, the same consequences shall ensue as if the tribunal had determined the appeal to that effect.

• (10) If an appeal under sub-paragraph (1) is notified to the tribunal and it appears to the tribunal that the assessment, determination or amendment is wrong—

• (a) because no, or a smaller, assessable profit or a, or a larger, allowable loss has accrued for the chargeable period in question; or

• (b) because a, or a larger, assessable profit or no, or a smaller, allowable loss has accrued for that period,

the tribunal shall vary the assessment, determination or amendment in such manner, or substitute such assessment or determination, as may be required; and it shall be for the participator to satisfy the tribunal as to any matter within paragraph (a) above.

• (10A) If an appeal under sub-paragraph (1A) is notified to the tribunal and it appears to the tribunal that the decision is wrong, the tribunal shall substitute such decision as may be required.

• (11) When an appeal is notified to the tribunal, the decision of the tribunal on the appeal is final and conclusive.

• (12) But sub-paragraph (11) is subject to—

• (a) sections 9 to 14 of the Tribunals, Courts and Enforcement Act 2007,

• (b) Tribunal Procedure Rules, and

• (c) any provision of this Schedule.

Interest on tax

15

• (1) Subject to sub-paragraph (2) below, tax charged in an assessment for a chargeable period shall carry interest at the rate applicable under section 178 of the Finance Act 1989 from two months after the end of the period until payment.

• (2) Nothing in sub-paragraph (1) above shall authorise or require interest to be charged from any time before 30th April 1976.

• (3) Where, under paragraph 14(3) above, tax may be withheld until the determination or abandonment of an appeal, the interest on that tax may also be withheld until the determination or abandonment of the appeal.

16

Subject to paragraph 17 below where any amount of tax charged by an assessment to tax or paid on account of tax so charged becomes repayable under any provision of this Part of this Act that amount shall carry interest at the rate applicable under section 178 of the Finance Act 1989from—

• (a) two months after the end of the chargeable period for which the assessment was made; or

• (b) the date on which it was paid,

whichever is the later, until the order for repayment is issued.

SCHEDULE 3

Definition of sale of oil at arm’s length

1

• (1) For the purposes of this Part of this Act a sale of any oil is a sale at arm’s length if, but only if, the following conditions are satisfied with respect to the contract of sale, that is to say—

• (a) the contract price is the sole consideration for the sale;

• (b) the terms of the sale are not affected by any commercial relationship (other than that created by the contract itself) between the seller or any person connected with the seller and the buyer or any person connected with the buyer; and

• (c) neither the seller nor any person connected with him has, directly or indirectly, any interest in the subsequent resale or disposal of the oil or any product derived therefrom.

• (2) Section 1122 of CTA 2010 (connected persons) shall apply for the purposes of the preceding sub-paragraph.

Definition of market value of oil

2

• (1) Except in the case of light gases the market value of any particular quantity of oil of any kind on any day shall be determined for the purposes of this Part of this Act in accordance with this paragraph and, accordingly, references in the following provisions of this paragraph to oil do not apply to light gases.

• (1A) This paragraph makes different provision according to whether the oil is—

• (a) Category 1 oil of any kind, or

• (b) Category 2 oil of any kind.

• (1B) For the purposes of this Act—

• (a) Category 1 oil is oil of any of one or more kinds specified as such in regulations made for the purpose by the Board;

• (b) Category 2 oil is oil of any other kind.

• (1C) The Board may specify oil of any particular kind as Category 1 oil only if they are satisfied that reports of prices for sales of oil of that kind are published and widely available (whether or not on payment of a fee).

• (2) The market value of any particular quantity of Category 1 oil of any kind is the price for which that quantity of oil of that kind might reasonably have been expected to be sold under a contract of sale that meets the following conditions—

• (a) the contract is for the sale of the oil at arm's length to a willing buyer;

• (b) the contract is for delivery of a single standard cargo of the oil;

• (c) the contract specifies a period of three days within which loading of the oil is to take place and that period includes the notional delivery day for the actual oil;

• (d) the contract requires the oil to have been subjected to appropriate initial treatment before delivery;

• (e) the contract requires the oil to be delivered—

• (i) in the case of oil extracted in the United Kingdom, at the place of extraction; or

• (ii) in the case of oil extracted from strata in the sea bed and subsoil of the territorial sea of the United Kingdom or of a designated area, at the place in the United Kingdom or another country at which the seller could reasonably be expected to deliver it or, if there is more than one such place, the one nearest to the place of extraction.

The terms as to payment which are to be implied in the contract are those which are customarily contained in contracts for the sale at arm's length of oil of the kind in question.

• (2AA) The market value of any particular quantity of Category 2 oil of any kind is the price for which that quantity of oil of that kind might reasonably have been expected to be sold under a contract of sale that meets the following conditions—

• (a) the contract is for the sale of the oil at arm's length to a willing buyer;

• (b) the contract provides for delivery of the oil on the notional delivery day for the actual oil or within such period that includes that day as is normal under a contract at arm's length for the sale of oil of that kind (or, if there is more than one such period, the shortest of them);

• (c) the contract is made on a date such that the period between that date and the notional delivery day for the actual oil is the normal period between contract and delivery in the case of a contract at arm's length for the sale of oil of that kind (or, if there is more than one such period, the shortest of them);

• (d) the contract requires the oil to have been subjected to appropriate initial treatment before delivery;

• (e) the contract requires the oil to be delivered—

• (i) in the case of oil extracted in the United Kingdom, at the place of extraction; or

• (ii) in the case of oil extracted from strata in the sea bed and subsoil of the territorial sea of the United Kingdom or of a designated area, at the place in the United Kingdom or another country at which the seller could reasonably be expected to deliver it or, if there is more than one such place, the one nearest to the place of extraction.

The terms as to payment which are to be implied in the contract are those which are customarily contained in contracts for the sale at arm's length of oil of the kind in question.

• (2E) For the purposes of sub-paragraph (2) or (2AA) above, the price of any quantity of Category 1 or Category 2 oil of any kind shall be determined in such manner, on the basis of such information, and by reference to such factors, as may be prescribed for oil of that Category and kind in regulations made by the Board.

• (2F) The provision that may be made by regulations under subsection (2E) above includes provision for or in connection with any or all of the following—

• (a) determining the price by reference to prices, or an average of prices, for sales of oil (whether or not oil of the Category or kind in question, and whether the prices are prices under actual contracts, prices that are published and widely available (whether on payment of a fee or otherwise) or prices ascertained or determined in some other way);

• (b) the prices to be taken into account;

• (c) the descriptions of contracts to be taken into account;

• (d) the method to be used for determining an average of prices;

• (e) the day or days, or period or periods, by reference to which prices, or any average of prices, is to be determined;

• (f) the application of a prescribed price differential, in cases where the price of oil of one kind falls to be determined in whole or in part by reference to prices for oil of some other kind.

• (2G) Sub-paragraph (2I) below has effect if, or in so far as, the Board are satisfied that it is impracticable or inappropriate to determine for the purposes of sub-paragraph (2) or (2AA) above the price of any oil in accordance with the provisions of regulations for the time being in force under sub-paragraph (2E) above.

• (2H) For that purpose it is immaterial whether the impracticability or inappropriateness is by virtue of—

• (a) an insufficiency of contracts or published prices that satisfy the conditions,

• (b) an insufficiency of information relating to such contracts or published prices, or

• (c) the nature of the market for oil of the kind in question,

or for any other reason.

• (2I) Where this sub-paragraph has effect, the price is to be determined—

• (a) so far as it is practicable and appropriate to do so by reference to other contracts or published prices (whether or not relating to oil of the same kind) and in accordance with the principles set out in the regulations for determining an average of prices; and

• (b) so far as it is not practicable or appropriate to determine it as mentioned in paragraph (a) above, in such other manner as appears to the Board to be appropriate in the circumstances.

• (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (3A) Where all or any of the oil whose market value falls to be ascertained in accordance with sub-paragraph (1) and sub-paragraph (2) or (2AA) above has been subjected to initial treatment before being disposed of or relevantly appropriated, the appropriate initial treatment referred to in sub-paragraph (2)(d) or (2AA)(d) above shall, as respects that oil, include the whole of that treatment.

• (4) The provisions of sub-paragraphs (2) and (2AA) above shall apply for the ascertainment of the market value of oil in any case mentioned in paragraph 2(2) of Schedule 2 to this Act as they apply in relation to the corresponding case mentioned in those provisions.

• (5) In this paragraph “prescribed” means specified in, or determined in accordance with, regulations.

Aggregate market value of oil for purposes of section 2(5)

3

• (1) For the purposes of subsection (5) of section 2 of this Act, the aggregate market value of any oil falling within paragraph (b) or (c) of that subsection is arrived at as follows.

• (2) In the case of oil falling within paragraph (b) of that subsection and delivered as there mentioned in the chargeable period in question—

• (a) for each delivery, find (in accordance with paragraph 2 above (read, where applicable, with paragraph 2A above)) the market value of the quantity of oil delivered, and

• (b) aggregate the market values so found.

• (3) In the case of oil falling within paragraph (c) of that subsection and appropriated as there mentioned in the chargeable period in question—

• (a) for each appropriation, find (in accordance with paragraph 2 above (read, where applicable, with paragraph 2A above)) the market value of the quantity of oil appropriated, and

• (b) aggregate the market values so found.

Oil delivered in place of royalties to be disregarded for certain purposes

4

Oil delivered to the OGA under the terms of a licence granted under Part I of the Petroleum Act 1998shall be disregarded for the purposes of section 2(5) of this Act and for the purposes of the references in section 8(3) and (4) of this Act to a participator’s share of the oil won and saved from an oil field in a chargeable period.

Effect of transfer to an associated company of participator’s rights etc. in connection with an oil field or relevant licence

5

• (1) This paragraph applies to any agreement or other arrangement between a participator in an oil field and a company associated with the participator whereby—

• (a) ownership of all or any of the participator’s share of the oil won and saved from the field is transferred to the company; and

• (b) the company obtains or assumes all or any of the participator’s other rights, interests and obligations in connection with the field or any relevant licence.

• (2) As regards any chargeable period in which a participator in an oil field is a party to an arrangement to which this paragraph applies, the other party to the arrangement shall be treated for all purposes of this Part of this Act (except this paragraph) and for the purposes of sections 299 to 301 of CTA 2010 as having been a participator in the field at all times when the actual participator was such a participator (including times before the arrangement was made), and shall be assessable and chargeable to tax and entitled to make any claim under this Part of this Act, and any deduction or claim under sections 299 to 301 of CTA 2010, accordingly.

• (3) Where a participator in an oil field is or has been a party to an arrangement to which this paragraph applies then for all purposes of this Part of this Act—

• (a) anything done by or in relation to the participator in connection with the field or any relevant licence shall be treated as being or having been done by or, as the case may be, in relation to the other party to the arrangement; and

• (b) all rights, interests or obligations of the participator in connection with the field or any relevant licence shall be treated as being or having been rights, interests or obligations of the other party.

• (4) Where a participator in an oil field is or has been a party to an arrangement to which this paragraph applies, then, if any tax or interest payable under this Part of this Act by the other party to the arrangement is not paid within thirty days after the date on which it becomes payable, the Board may by notice in writing require the participator to pay that tax or interest; and where such a notice is served on the participator, the tax or interest in question shall be payable by him forthwith, but without prejudice to the Board’s right to recover it from the other party.

• (5) For the purposes of this paragraph “company” means any body corporate, and a participator in an oil field and another company are associated with one another if—

• (a) the participator has control over or is under the control of the other company; or

• (b) the participator and the other company are both under the control of the same person or persons;

and in this sub-paragraph “control” has the meaning given by section 1124 of CTA 2010.

Oil owned by a person other than a participator in the oil field from which it was won

6

• (1) Where a proportion of a participator’s share in the oil won and saved from an oil field (as distinct from a specific quantity of oil comprised in that share) is owned by a person (in this paragraph referred to as “the owner”) who is not a participator and who acquired it (whether directly or indirectly) under an agreement to which paragraph 5 above does not apply, the following provisions of this paragraph shall have effect.

• (2) For the purposes of this Part of this Act the oil acquired by the owner under the agreement shall be treated in every case as having been disposed of to him by the participator otherwise than in a sale at arm’s length.

• (3) Where any oil which the owner owns in right of the agreement is in pursuance of the agreement—

• (a) delivered to the owner by the participator; or

• (b) delivered to a third person by the participator acting on behalf of the owner,

the delivery shall for the purposes of this Part of this Act be regarded as a delivery by the participator although he does not own the oil.

• (4) This sub-paragraph applies to all such oil (if any) as, being owned by the owner in right of the agreement, is in any chargeable period delivered by the participator as mentioned in the preceding sub-paragraph and would accordingly, apart from the following sub-paragraph, fall to be brought into account under section 2(5)(b) of this Act in computing the assessable profit or allowable loss accruing to the participator in that period (in the following sub-paragraph referred to as “the relevant period”).

• (5) If on a claim made by the participator within two months after the end of the relevant period—

• (a) it is shown that some or all of the oil to which sub-paragraph (4) above applies has been disposed of by or on behalf of the owner crude in sales at arm’s length; and

• (b) the Board are satisfied that the oil with respect to which it is so shown includes the whole of so much of the oil to which that sub-paragraph applies as has been so disposed of,

then, in computing the assessable profit or allowable loss accruing to the participator in the relevant period, the oil with respect to which it is so shown shall be brought into account by reference to the price received or receivable for it by the owner instead of by reference to its market value.

Exclusion from section 2(4)(b) and (5)(d) of offshore oil in transit to place of first landing . . .

7

In computing the assessable profit or allowable loss accruing to a participator in a chargeable period from an oil field, the market value of any oil won as mentioned in section 3(1)(f) of this Act—

• (a) shall not be taken into account under section 2(4)(b) of this Act if and to the extent that at the end of the preceding chargeable period the oil was in the course of being transported to the place where it was first landed in the United Kingdom or to the place referred to in section 3(1)(f)(ii) of this Act; and

• (b) shall not be taken into account under section 2(5)(d) of this Act if and to the extent that at the end of the first-mentioned chargeable period the oil was in the course of being so transported.

Certain subsidised expenditure to be disregarded

8

• (1) Expenditure shall not be regarded for any of the purposes of this Part of this Act as having been incurred by any person in so far as it has been or is to be met directly or indirectly by the Crown or by any government or public or local authority, whether in the United Kingdom or elsewhere, or by any person other than the first-mentioned person, unless it is so met by a grant made under Part I of the Industry Act 1972 or a grant made under an enactment of the Parliament of Northern Ireland or Measure of the Northern Ireland Assembly and declared by order of the Treasury under section 84 of the Capital Allowances Act 1968 to correspond to a grant made under the said Part I.

• (1A) But sub-paragraph (1) above does not apply to any expenditure for which the relevant participator is liable that has been or is to be met directly or indirectly out of a payment made by the guarantor under an abandonment guarantee.

• (1B) In sub-paragraph (1A) above—

• “abandonment guarantee” has the same meaning as it has for the purposes of section 3 of this Act (see section 104 of the Finance Act 1991), and

• “the guarantor” and “the relevant participator” have the same meaning as in section 104 of that Act.

• (2) In considering, for the purposes of this paragraph, how far any expenditure has been or is to be met directly or indirectly by the Crown or by any authority or person other than the person incurring the expenditure, there shall be left out of account any insurance or compensation payable in respect of the loss or destruction of any asset.

• (3) This paragraph is subject to paragraph 11A (transfers of interests in oil fields: post-transfer decommissioning expenditure).

Election to have amounts mentioned in section 2(9)(b) and (c) spread

9

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Restriction of amount of reduction under section 8(1)

11

Where—

• (a) a claim under Schedule 5 or 6 to this Act is made after the relevant time; and

• (b) the reduction which would, apart from this paragraph, fall to be made under subsection (1) of section 8 of this Act for any chargeable period is greater than it would have been if the expenditure and other amounts allowed on the claim had been claimed before and allowed at the relevant time,

then, if the Board so direct, the reduction made under that subsection for that chargeable period shall be only what it would have been if the expenditure and other amounts allowed on the claim had been claimed before and allowed at the relevant time.

SCHEDULE 4

Restrictions on expenditure allowable under section 3 or 4

1

• (1) Expenditure incurred by any person in the acquisition of an asset is not allowable under section 3 or 4 of this Act for an oil field if expenditure previously incurred by another person in acquiring, bringing into existence, or enhancing the value of that asset is allowable under that section for that field.

Section 4(13) of this Act applies to the preceding provisions of this sub-paragraph.

• (2) Sub-paragraph (1) above shall, with any necessary modifications, have effect in relation to expenditure incurred by a person—

• (a) in renting or hiring an asset or any interest in an asset; or

• (b) for the provision of services or other business facilities of whatever kind; or

• (c) for the grant or transfer to him of any right, licence or interest (other than an interest in an asset),

as it has effect in relation to expenditure incurred in the acquisition of, or of an interest in, an asset.

2

• (1) Where, in a transaction to which this paragraph applies, a person has incurred expenditure in acquiring, bringing into existence or enhancing the value of an asset, he shall at any time be treated for the purposes of—

• (a) sections 3 and 4 of this Act, and

• (b) sections 3 and 4 of and Schedule 1 to the Oil Taxation Act 1983,

as having incurred that expenditure only to the extent that it does not exceed the lowest of the amounts described in sub-paragraph (1ZA) below which is applicable in the particular case.

• (1ZA) Those amounts are—

• (a) the amount of expenditure (other than loan expenditure) incurred up to the time mentioned in sub-paragraph (1) above in a transaction to which this paragraph does not apply (or, if there has been more than one such transaction, the later or latest of them) in acquiring, bringing into existence, or enhancing the value of, the asset;

• (b) the amount of the open market consideration for the acquisition, bringing into existence, or enhancement of the value, of the asset;

• (c) in a case where the other party to the transaction is a participator in a taxable field and in the case of that participator either—

• (i) an amount is brought into account under section 2 of this Act in accordance with section 7(1) of the Oil Taxation Act 1983 as disposal receipts in respect of the transaction, or

• (ii) no amount is so brought into account by reason of reductions falling to be made in the amount that would have been so brought into account apart from those reductions,

the amount so brought into account or, as the case may be, nil;

• (d) in a case where the other party to the transaction is not a participator in a taxable field but—

• (i) the transaction is the latest in a series of transactions in respect of the asset (or in respect of an asset or assets in which the asset was comprised),

• (ii) those transactions are transactions to which this paragraph applies,

• (iii) in the case of at least one of those transactions, there is a party who is a participator in an oil field, and

• (iv) in the case of any such party, an amount either is brought into account as mentioned in paragraph (c)(i) above in respect of the transaction or would have been so brought into account but for such reductions as are mentioned in paragraph (c)(ii) above,

so much of the amount so brought into account in respect of that transaction (or, where there are two or more such transactions, the later or latest of them) as is justly and reasonably referable to the asset mentioned in sub-paragraph (1) above (taking that amount as being nil in the case of any transaction where no amount is so brought into account by reason of any such reductions).

• (1A) Subsections (1) to (3) of section 191 of the Finance Act 1993 apply to determine for the purposes of this paragraph what expenditure has at any time been incurred under a transaction to which this paragraph does not apply, as they apply in relation to expenditure for the allowance of which a claim is received by the Board after 16th March 1993.

• (1B) In sub-paragraph (1ZA)(a) above “loan expenditure” means expenditure in respect of interest or any other pecuniary obligation incurred in obtaining a loan or any other form of credit.