Oil Taxation Act 1983

• (3) In any case where—

• (a) the tariff receipts or disposal receipts of a participator in respect of the use or disposal of a qualifying asset include consideration which is received or receivable from a person who is connected with the participator, and

• (b) consideration is received or receivable from a person who is not connected with the participator by a person who is so connected (whether the person referred to in paragraph (a) above or not), and

• (c) apart from this sub-paragraph, the consideration referred to in paragraph (b) above or (where there is more than one connected participator) a portion of that consideration would, by virtue of sub-paragraph (2) above, be included in the tariff receipts or disposal receipts of the participator which are referable to the use or disposal of the qualifying asset concerned,

only so much of the consideration or, as the case may be, of the portion of it referred to in paragraph (b) above as exceeds the consideration referred to in paragraph (a) above shall be included (by virtue of sub-paragraph (2) above) in the tariff receipts or, as the case may be, the disposal receipts of the participator.

Apportionment of consideration in respect of use or disposal

3

In any case where—

• (a) consideration received or receivable by a participator in an oil field in respect of the use or disposal of a qualifying asset includes an element that is unquantified but which does not constitute a tariff receipt or disposal receipt of his, and

• (b) the consideration does not fall to be apportioned by virtue of section 6(4) or section 7(5) of this Act,

the portion of the consideration which constitutes a tariff receipt or disposal receipt of the participator shall be determined in such a manner as is just and reasonable.

Cases where all the oil is disregarded under section 10 of the principal Act

4

• (1) This paragraph applies in any case where, in computing under section 2 of the principal Act the gross profit or loss accruing to a participator in any chargeable period from the chargeable field, all the oil which, apart from section 10 of that Act (exempt gas), would be taken into account falls to be disregarded under subsection (1) of that section.

• (2) In any case where this paragraph applies, subsection (1) of section 8 of this Act shall have effect in relation to the participator as if—

• (a) in paragraph (a) the word “either” and the words “or is a mobile asset dedicated to that oil field” were omitted; and

• (b) in paragraph (b) for the words “is allowable, or has” there were substituted the words “would, apart from section 10(2) of the principal Act, be allowed or have”;

and, in relation to the participator, tariff receipts and disposal receipts shall be construed accordingly.

• (2A) In any case where this paragraph applies, paragraph (b) of subsection (1A) of section 8 of this Act shall have effect in relation to the participator as if—

• (a) for the words “does not” there were substituted “would not”; and

• (b) at the end there were added the words “even if section 10(2) of the principal Act were disregarded”

• (3) Subsections (6) to (8) of section 7 of this Act shall not apply where the asset is a qualifying asset by reason only of sub-paragraph (2) above.

Acquisition otherwise than at arm’s length: limit on tariff and disposal receipts

5

• (1) In any case where—

• (a) in a transaction to which paragraph 2 of Schedule 4 to the principal Act applies (restriction on allowable expenditure where asset acquired in a transaction not at arm’s length) a participator in a taxable field makes a disposal of a qualifying asset, and

• (b) the disposal gives rise to what would, apart from this paragraph, be tariff receipts or disposal receipts of the participator for a chargeable period, and

• (c) those receipts are received from a person who is also a participator in a taxable field (whether the same field or not), and

• (d) the use of the asset will be wholly by that person in connection with a taxable field in which he is a participator (and accordingly, and in particular, there will be no use giving rise to tariff receipts)

the receipts referred to in paragraphs (b) and (c) aboveshall not be regarded as tariff receipts or disposal receipts if and to the extent that their aggregate in the period beginning with the transaction and ending with the end of that chargeable period exceeds relevant expenditure.

• (2) In this paragraph “relevant expenditure” means expenditure (other than expenditure in respect of interest or any other pecuniary obligation incurred in obtaining a loan or any other form of credit) incurred by the participator referred to in sub-paragraph (1)(a) above or by another person in acquiring, bringing into existence, or enhancing the value of the asset in a transaction to which paragraph 2 of Schedule 4 to the principal Act does not apply (or, if there has been more than one such transaction, the later or latest of them).

• (3) In any case where—

• (a) in a transaction to which paragraph 2 of Schedule 4 to the principal Act applies, a participator in a taxable field makes a disposal of a qualifying asset, and

• (b) the disposal does not fall within sub-paragraph (1) above, and

• (c) the disposal either gives rise to tariff receipts or disposal receipts of the participator for a chargeable period or is made for no consideration,

the disposal shall be treated as giving rise to disposal receipts or tariff receipts (according to the nature of the disposal) equal to the open market consideration for the disposal and any actual receipts falling within paragraph (c) above shall be disregarded.

• (4) Without prejudice to paragraph 1(2) above, in this paragraph “disposal”, in relation to a qualifying asset, includes the hiring of it or any similar transaction by which the use of the asset gives rise, or might reasonably be expected to give rise, to receipts (whether in the nature of income or capital).

• (5) The reference in sub-paragraph (3) above to the open market consideration for a disposal is a reference to the consideration which might reasonably have been obtained for the disposal in question (whatever its nature) had it been made in a transaction to which paragraph 2 of Schedule 4 to the principal Act does not apply.

Transfers of interests in fields

6

In paragraph 19 of Schedule 17 to the Finance Act 1980 (transfers of interests in oil fields: disposal of long-term assets) at the beginning there shall be inserted the word “Neither” and for the words “shall not” there shall be substituted “nor section 7 of the Oil Taxation Act 1983 shall”.

Insurance and compensation payments

7

Any payment by way of insurance or compensation in respect of the loss or destruction of an asset which, in relation to a participator in an oil field, is a qualifying asset, shall be brought into account for the purposes of section 7 of this Act and this Schedule as consideration in respect of a disposal of the asset taking place at the time the payment is received or receivable.

Dedicated mobile assets ceasing to be used in connection with participator’s oil field

8

• (1) This paragraph applies in any case where—

• (a) a mobile asset which, in relation to a participator in an oil field, is a qualifying asset gives rise to receipts which, apart from the provisions of this paragraph, would be tariff receipts of the participator; and

• (b) the asset has ceased to be used in connection with any oil field whatsoever in which the participator or a person connected with him is a participator.

• (2) In any case where this paragraph applies, so much of what would, apart from this paragraph, be tariff receipts of the participator arising from the asset and which are neither—

• (a) received or receivable before the end of the chargeable period in which falls the second anniversary of the date on which the asset ceased to be used as mentioned in sub-paragraph (1)(b) above, nor

• (b) received or receivable after the end of that chargeable period in respect of the use of the asset before the end of that period,

shall not form part of the tariff receipts of the participator for any chargeable period in which the asset is not used as mentioned in sub-paragraph (1)(b) above.

Disposal receipts in respect of brought-in assets

9

If paragraph 7(4) of Schedule 1 to this Act applies to reduce the allowable expenditure, within the meaning of Part II of that Schedule, in respect of an asset and any disposal receipt is received or receivable in respect of the asset, the amount which, apart from this paragraph, would be the amount of that receipt shall be taken to be reduced by multiplying it by the same fraction as, by virtue of the said paragraph 7(4), was applied to that allowable expenditure.

Disposal receipts: assets used for deballasting

10

In any case where—

• (a) section 4(2) of this Act applies to reduce the expenditure allowable as mentioned in section 3(4) of this Act in respect of an asset, and

• (b) any disposal receipt is received or receivable in respect of the asset,

the amount which, apart from this paragraph, would be the amount of that receipt shall be taken to be reduced in the proportion in which the expenditure so allowable was reduced by virtue of section 4(2) of this Act.

Use by connected or associated person: avoidance devices

11

• (1) This paragraph applies in any case where—

• (a) any consideration in respect of the use of an asset is received or receivable by a person (in this paragraph referred to as “the recipient”) in relation to whom the asset is not a qualifying asset; and

• (b) the asset is at any time used in connection with an oil field by a person (in this paragraph referred to as “the user”) who is connected or associated with the recipient and who is a participator in that or any other oil field; and

• (c) the consideration is so received or receivable under or in consequence of a scheme or arrangements the main purpose or one of the main purposes of which is the avoidance of petroleum revenue tax or corporation tax.

• (2) Subject to sub-paragraphs (5) and (6) below, the user shall be treated for the purposes of this Act and Part I of the principal Act and sections 299 to 301 of the Corporation Tax Act 2010 as if—

• (a) any consideration arising from the use of the asset and received or receivable at any time by the recipient or a person connected or associated with him, other than consideration received or receivable from the user himself, had been received or receivable at that time by the user; and

• (b) such proportion of any expenditure incurred by the recipient at any time in connection with the asset as it is just and reasonable to apportion to the use which gives rise to the consideration had been incurred at that time by the user for the purpose for which it was in fact incurred by the recipient.

• (3) For the purposes of this paragraph, a participator in an oil field is associated with another person if the participator, by acting together with a person who is, or two or more persons each of whom is, a participator in that oil field or in any other relevant field, would be able to secure or exercise control of that other person, and for this purpose—

• (a) “control” shall be construed in accordance with sections 450 and 451 of the Corporation Tax Act 2010; and

• (b) “relevant field” means an oil field in connection with which the asset referred to in sub-paragraph (1)(a) above has been, is, or is expected to be, used.

• (4) For the purposes of sub-paragraph (3) above—

• (a) a foreign field, within the meaning of section 12 of this Act, shall be treated as an oil field, and

• (b) an asset is used in connection with a relevant field which is a foreign field if it is used in a way which, on the assumptions set out in subsection (5) of that section, would be use in connection with the foreign field,

and, in relation to a relevant field which is a foreign field, the reference in sub-paragraph (3) above to a participator shall be construed in accordance with section 12(2)(b) of this Act.

• (5) If, in relation to the recipient, there is more than one person who is the user, any consideration or expenditure falling within paragraph (a) or paragraph (b) of sub-paragraph (2) above shall be apportioned between those persons in such manner as is just and reasonable.

• (6) Sub-paragraph (2)(b) above does not apply if the asset is a mobile asset which is not dedicated to an oil field.

Purchase at place of extraction

12

• (1) Subject to sub-paragraphs (4) to (6) below, in any case where—

• (a) a participator in an oil field or any person connected with him purchases any oil, otherwise than in pursuance of such an agreement as is mentioned in paragraph 6A of Schedule 3 to the principal Act (transactions between participators), and takes delivery of that oil at the place of extraction, and

• (b) any of that oil is transported, initially treated or initially stored (or subjected to any two or more of those operations) by means of any asset which is a qualifying asset in relation to that field, and

• (c) when the oil is disposed of or relevantly appropriated by the participator or the person connected with him, the selling price of the oil exceeds the price paid for it on the purchase referred to in paragraph (a) above,

the participator shall be treated for the purposes of this Act and Part I of the principal Act and sections 299 to 301 of the Corporation Tax Act 2010 as having received an amount equal to that excess as tariff receipts which arise in the chargeable period in which the selling price falls to be determined and are attributable to the use of the asset for carrying out the operation or operations referred to in paragraph (b) above.

• (2) In this paragraph “selling price”, in relation to any oil, means the aggregate of the amounts determined in relation to that oil in accordance with paragraphs (a) to (cb) of subsection (5) of section 2 of the principal Act; and for the purpose of the application of those paragraphs and of determining whether any oil falling within sub-paragraph (1) above is relevantly appropriated,—

• (a) a person who is connected with the participator and who purchased oil as mentioned in sub-paragraph (1)(a) above shall be deemed to be a participator; and

• (b) oil falling within sub-paragraph (1) above shall be treated for the purposes of section 2(5) of the principal Act and the definition of “relevantly appropriated” in section 12 of that Act as if it were oil won from the field referred to in paragraph (a) of that sub-paragraph.

• (3) A person who takes delivery of oil before it has been transported—

• (a) to the place at which it is first landed in the United Kingdom; or

• (b) to the place referred to in section 3(1)(f)(ii) of the principal Act

shall be treated for the purposes of sub-paragraph (1)(a) above as having taken delivery of the oil at the place of extraction.

• (4) Sub-paragraph (1) above does not apply to oil if, at a time before the participator’s selling price for that oil falls to be determined as mentioned in sub-paragraph (2) above, the oil is either—

• (a) stored in the field referred to in paragraphs (a) and (b) of sub-paragraph (1) above; or

• (b) used for the purpose of assisting the extraction of oil from that field.

• (5) Sub-paragraph (1) above does not apply to oil if, by virtue of 2(5)(b) or (ca) of the principle oil Act (oil disposed of otherwise than in sales at arm’s length), the market value of the oil is taken into account in calculating the gross profit and loss (if any) accruing to a participator from an oil field in any chargeable period.

• (6) In any chargeable period ending on or after 30th June 2004, sub-paragraph (1) above does not apply to oil in a case where—

• (a) had the operation or operations to which the oil was subjected as mentioned in paragraph (b) of that sub-paragraph been carried out under a contract entered into on or after 9th April 2003, and

• (b) had an amount been received or receivable under the contract in that chargeable period by the participator,

that amount would have been a tax-exempt tariffing receipt.

SCHEDULE 3

Tariff Receipts Allowance The participator's share

1

• (1) In this Schedule—

• “the principal section” means section 9 of this Act;

• “receipts from existing contracts” means qualifying tariff receipts under a contract or contracts made as mentioned in subsection (3) of the principal section;

and other expressions have the same meaning as in the principal section.

• (2) In relation to a user field, any reference in the following provisions of this Schedule to the oil to which any qualifying tariff receipts which are received or receivable in a chargeable period relate is a reference to the oil won from that user field which, in that chargeable period, is extracted, transported, initially treated or initially stored (or subject to two or more of those operations) by means of the asset to which the qualifying tariff receipts are referable.

2

• (1) Subject to paragraphs 3 and 6 below, where an amount of qualifying tariff receipts received or receivable by a participator in a chargeable period from a user field falls to be treated, for the purpose mentioned in subsection (1) of the principal section, as reduced in accordance with paragraph (a) or paragraph (b) of that subsection, the cash equivalent of his share of the tariff receipts allowance in respect of that user field for that period is the amount given, subject to sub-paragraph (2) below, by the formula:—

£(AyB/C)

where—

• “A” is the amount of those qualifying tariff receipts;

• “B” is the tariff receipts allowance in respect of that user field, expressed in metric tonnes; and

• “C” is the amount, in metric tonnes, of the oil to which those qualifying tariff receipts relate.

• (2) If, apart from this sub-paragraph, the fraction B/C in the formula in sub-paragraph (1) above would exceed unity, it shall be treated as unity for the purposes of this Schedule.

3

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

Qualifying tariff receipts referable to different periods

4

• (1) This paragraph applies if any qualifying tariff receipts which are received or receivable by a participator for a chargeable period from a user field are referable to the use of a qualifying asset for a period (in this paragraph and paragraph 5 below referred to as “the period of use”) which is not wholly comprised in that chargeable period.

• (2) If, apart from this sub-paragraph, the period of use would exceed ten years, it shall be treated for the purposes of the following provisions of this paragraph as ending immediately before the tenth anniversary of the first day of the period.

• (3) In a case where this paragraph applies, the qualifying tariff receipts referred to in sub-paragraph (1) above shall be treated for the purpose mentioned in subsection (1) of the principal section as reduced in accordance with paragraph 5 below and not in accordance with paragraph (a) or paragraph (b) of that subsection.

• (4) For the purpose of determining the amount of the reduction under paragraph 5 below,—

• (a) the qualifying tariff receipts shall be regarded as wholly received in the period of use; and

• (b) if the period of use is not wholly comprised in a chargeable period, a portion of those receipts shall be regarded as received in each chargeable period which, in whole or in part, is comprised in the period of use;

and any chargeable period which, in whole or in part, is comprised in the period of use is in the following provisions of this paragraph and paragraph 5 below referred to as a “relevant chargeable period”.

• (5) For the relevant chargeable period or, as the case may be, for each of them, there shall be determined the amount of oil won from the user field in question which is expected to be qualifying oil for that period; and in this paragraph and paragraph 5 below “qualifying oil”, in relation to a chargeable period, means oil which in that period is extracted, transported, initially treated or initially stored by means of any asset or assets giving rise to the qualifying tariff receipts referred to in sub-paragraph (1) above.

• (6) In a case falling within paragraph (b) of sub-paragraph (4) above, the portion of the qualifying tariff receipts which is to be regarded as received in each of the relevant chargeable periods shall bear to each of those receipts the same proportion as the amount of the qualifying oil for that period bears to the total of the qualifying oil for all the relevant chargeable periods.

• (7) In any case where, apart from this sub-paragraph, it is not practicable to determine for the purpose of sub-paragraph (5) above how much of the oil won from a user field is for any period expected to be qualifying oil, such a determination shall be made on the assumption that any asset which gives rise to qualifying tariff receipts falling within that sub-paragraph will at all times be used to the full extent which, by reference to the receipts, is available for the extraction, transport, initial treatment or initial storage of oil won from the user field in question.

5

• (1) For the purpose of calculating the reduction referred to in paragraph 4(3) above, there shall be determined, in accordance with paragraphs 2 and 3 above and sub-paragraphs (2) and (3) below, the amount which would be the cash equivalent of the participator’s share of the tariff receipts allowance in respect of the user field in question for the relevant chargeable period or, if there is more than one such period, for each of them.

• (2) For a relevant chargeable period, the determination referred to in sub-paragraph (1) above shall be made on the basis—

• (a) that “A” in the formula in paragraph 2 above is the amount of the qualifying tariff receipts determined for the period under sub-paragraph (6) of paragraph 4 above or, if that sub-paragraph does not apply, the whole of the qualifying tariff receipts referred to in sub-paragraph (1) of that paragraph; and

• (b) that “C” in the formula in paragraph 2 above is the amount of the qualifying oil for that period.

• (3) If, on the determination under sub-paragraph (1) above, the cash equivalent of the participator’s share of the tariff receipts allowance in respect of the user field in question would, apart from this sub-paragraph, exceed the qualifying tariff receipts for that period (as calculated under sub-paragraph (2) above) then, for the purposes of this paragraph, the amount of that cash equivalent shall be taken to be reduced to an amount equal to those qualifying tariff receipts.

• (4) The amount of the reduction referred to in paragraph 4(3) above shall be an amount equal to the cash equivalent of the participator’s share of the tariff receipts allowance in respect of the user field in question for the relevant chargeable period, as determined under this paragraph, or, if there is more than one relevant chargeable period, the aggregate of the cash equivalents as so determined for each of the relevant chargeable periods.

6

• (1) In any case where—

• (a) there are normal qualifying tariff receipts from a user field for a chargeable period which, for the purpose of determining the amount of a reduction under paragraph 5 above in an amount of straddling qualifying tariff receipts from that field, was a relevant chargeable period as defined in paragraph 4(4) above, and

• (b) those normal qualifying tariff receipts relate to oil to which the straddling qualifying tariff receipts do not relate,

the amount which, apart from this paragraph, would be the cash equivalent of the participator’s share of the tariff receipts allowance in respect of that user field for that chargeable period shall be varied in accordance with the following provisions of this paragraph.

• (2) In the first instance, the cash equivalent of the participator’s share of the tariff receipts allowance for the chargeable period in question shall be determined, in accordance with paragraphs 2 and 3 above, on the basis that—

• (a) there is to be added to the normal qualifying tariff receipts for that period that portion of the straddling qualifying tariff receipts which, in accordance with sub-paragraph (6) of paragraph 4 above, is to be regarded as received in that period or, if that sub-paragraph does not apply, the whole of those receipts; and

• (b) there is to be added to the oil referred to in sub-paragraph (1)(b) above the oil which, by reference to the straddling qualifying tariff receipts, is qualifying oil for that chargeable period for the purposes of paragraphs 4 and 5 above.

• (3) The cash equivalent of the participator’s share referred to in sub-paragraph (1) above shall be the amount produced by deducting from the cash equivalent of that share, as determined under sub-paragraph (2) above, the amount of the cash equivalent of his share for the period in question as determined under paragraph 5 above.

• (4) For the purposes of this paragraph, qualifying tariff receipts are “normal” if they fall to be treated as reduced in accordance with paragraph (a) or paragraph (b) of subsection (1) of the principal section and “straddling” if they fall to be treated as reduced in accordance with paragraph 5 above.

SCHEDULE 4

Interpretation

1

In this Schedule—

• (a) “the principal section” means section 12 of this Act;

• (b) “the relevant assumptions” means—

• (i) those specified in subsection (5) of the principal section; and

• (ii) the assumption that a participator in a foreign field is a participator within the meaning of Part I of the principal Act;

• (c) “United Kingdom field” means an oil field within the meaning of Part I of the principal Act.

Chargeable receipts

2

A participator in a foreign field is chargeable to tax in accordance with this Schedule in respect of considerations falling within subsection (1) of the principal section if, and only if—

• (a) the field asset which gives rise to that consideration is, in accordance with paragraph 3 below, a chargeable asset in relation to him; and

• (b) the consideration constitutes, in accordance with paragraph 4 below, a receipt for which he is accountable;

and, where the conditions in paragraphs (a) and (b) above are fulfilled, the consideration is in this Schedule referred to as a chargeable receipt of the participator.

3

• (1) Subject to sub-paragraph (2) below, a field asset is a chargeable asset in relation to a participator in a foreign field if, on the relevant assumptions, expenditure incurred by the participator in respect of the asset would be or would have been allowable for that foreign field—

• (a) under section 3 of this Act or section 4 of the principal Act, or

• (b) in the case of an asset the useful life of which was, at the time the expenditure was incurred, expected to exceed six months, under section 3 of the principal Act.

• (2) An asset which is a field asset by virtue of subsection (6) of the principal section is a chargeable asset in relation to that participator in that foreign field in relation to whom and to which the asset referred to in paragraph (c) of that subsection is a chargeable asset.

4

• (1) Consideration falling within subsection (1) of the principal section constitutes a receipt for which a participator in a foreign field is accountable if, and only if,—

• (a) on the relevant assumptions, and

• (b) on the further assumption that the field asset which gives rise to the consideration is a qualifying asset,

the consideration would constitute, for the purposes of this Act, a tariff receipt or disposal receipt of the participator attributable to the foreign field.

• (2) In applying section 7 of this Act to determine whether any consideration falling within subsection (1)(c) of the principal section would, on the assumptions in sub-paragraph (1) above, constitute a disposal receipt, the reference in section 7(4)(b) of this Act to tariff receipts of the participator shall be construed as a reference to consideration falling within paragraph (a) or paragraph (b) of subsection (1) of the principal section which, on those assumptions, would constitute a tariff receipt of his.

5

• (1) Schedule 2 to this Act, except paragraphs 4 and 6 to 8, applies in relation to chargeable receipts on the relevant assumptions and also on the further assumptions—

• (a) that any reference in that Schedule to tariff receipts or disposal receipts includes a reference to chargeable receipts;

• (b) that, except in paragraphs 5 and 11(3), any reference in that Schedule to an oil field or a participator applies only to a foreign field or, as the case may be, a participator in a foreign field; and

• (c) that any reference in that Schedule to a qualifying asset is a reference to a field asset which, in accordance with paragraph 3 above, is a chargeable asset.

• (2) In Schedule 2 to this Act, as applied by sub-paragraph (1) above, any reference to any of the provisions specified in sub-paragraph (2) of paragraph 8 below shall be construed as a reference to that provision as it has effect by virtue of that sub-paragraph.

• (3) In its application by virtue of sub-paragraph (1) above, paragraph 2 of Schedule 2 to this Act shall have effect as if the reference in sub-paragraph (2) of that paragraph to section 6 or section 7 of this Act included a reference to the principal section.

• (4) Notwithstanding anything in paragraph (a) of sub-paragraph (1) above, paragraph 9 of Schedule 2 to this Act, in its application by virtue of that sub-paragraph, shall have effect as if the reference in that paragraph to any disposal receipt were a reference to any chargeable receipt falling within paragraph (c) of subsection (1) of the principal section.

• (5) In its application by virtue of sub-paragraph (1) above, paragraph 10 of Schedule 2 to this Act shall have effect as if,—

• (a) notwithstanding anything in paragraph (a) of that sub-paragraph, the reference in that paragraph to any disposal receipt were a reference to any chargeable receipt falling within paragraph (c) of subsection (1) of the principal section; and

• (b) in the application of paragraph 4 above for the purposes of paragraph 10 below, section 6(4)(b) of this Act were disregarded.

• (6) In its application by virtue of sub-paragraph (1) above, paragraph 11 of Schedule 2 to this Act shall have effect as if sub-paragraph (4) of that paragraph were omitted.

6

• (1) Subject to sub-paragraph (2) below, the chargeable receipts of a participator in a foreign field are attributable to that field for which expenditure incurred by him in respect of the field asset concerned would be or would have been allowable as mentioned in paragraph 3(1) above; and if there is more than one such foreign field, then the receipts are attributable to that one of those fields in connection with which, on the relevant assumptions, the field asset would have been first used.

• (2) The foreign field to which are attributable chargeable receipts referable to an asset which is a field asset by virtue of subsection (6) of the principal section is that field to which are attributable chargeable receipts referable to the field asset referred to in paragraph (c) of that subsection.

The charge to tax

7

• (1) In relation to a foreign field, every half year beginning on or after 1st July 1982 shall be taken to be a chargeable period.

• (2) In this paragraph “half year” has the same meaning as in section 1 of the principal Act.

• (3) Any reference in this Schedule to the chargeable period to which any chargeable receipts of a participator in a foreign field are attributable is,—

• (a) in the case of chargeable receipts falling within paragraph (c) of subsection (1) of the principal section, a reference to the chargeable period in which the disposal referred to in that paragraph occurs; and

• (b) in any other case, a reference to the chargeable period in which the receipts are received or receivable by him.

8

• (1) For each chargeable period of a foreign field beginning with that in which a participator in that field has chargeable receipts, there shall be determined, subject to the following provisions of this Schedule but otherwise in accordance with section 2 of the principal Act, what is the assessable profit or allowable loss accruing to the participator from the foreign field on the basis that—

• (a) the positive amounts for the purposes of section 2 of the principal Act consist of any chargeable receipts of his attributable to that field for that period; and

• (b) the negative amounts for those purposes are any amounts referred to in paragraphs (b), (c) and (f) of subsection (9) of that section.

• (2) For the purpose of the determination referred to in sub-paragraph (1) above, the provisions of Part I of the principal Act and sections 3 and 4 of and Part II of Schedule 1 to this Act shall have effect—

• (a) on the relevant assumptions; and

• (b) on the further assumption that any reference in those provisions to an oil field or a participator applies only to a foreign field or, as the case may be, a participator in a foreign field.

• (3) Without prejudice to sub-paragraph (2) above, in computing the assessable profit or allowable loss accruing to a participator in a foreign field, section 9 of and Schedule 3 to this Act shall apply—

• (a) on the relevant assumptions; and

• (b) on the further assumption that any chargeable receipts of his, other than those falling within subsection (1)(c) of the principal section, are tariff receipts,

• (4) In any case where, apart from this sub-paragraph, the whole or any part of any consideration which constitutes a chargeable receipt of a participator in a foreign field would also fall to be treated, by virtue of paragraph 2 or paragraph 11 of Schedule 2 to this Act, as a tariff or disposal receipt of a participator in a United Kingdom field, it shall not be so treated.

• (5) In any case, where, apart from this sub-paragraph, the whole or any part of any consideration which constitutes a tariff or disposal receipt of a participator in a United Kingdom field would also fall to be treated, by virtue of paragraph 2 or paragraph 11 of Schedule 2 to this Act, as applied by paragraph 5(1) above, as a chargeable receipt of a participator in a foreign field, it shall not be so treated.

9

• (1) Subject to sub-paragraph (2) below,—

• (a) the principal Act, and

• (b) the provisions of the Taxes Management Act 1970 which are applied by paragraph 1 of Schedule 2 to the principal Act,

shall have effect in relation to any assessable profit or allowable loss of a participator in a foreign field determined for a chargeable period under paragraph 8(1) above as if it were such an assessable profit or allowable loss as is referred to in section 1(2) of the principal Act.

• (2) No reduction shall be made by virtue of section 8 of the principal Act (oil allowance) in the assessable profit accruing to a participator in a foreign field for any chargeable period.

Expenditure relief

10

• (1) For the purpose of the determination referred to in sub-paragraph (1) of paragraph 8 above, no expenditure shall be allowable, by virtue of paragraph (b) of that sub-paragraph, under section 3 of the principal Act or section 3 of this Act unless—

• (a) the expenditure relates to a field asset which is a chargeable asset which gives rise, or is expected to give rise, to chargeable receipts; and

• (b) the expenditure is incurred either for the purpose of enabling the asset to be used in a way which gives rise, or is expected to give rise, to chargeable receipts falling within paragraph (a) or paragraph (b) of subsection (1) of the principal section, or for the purpose of enhancing the value of the asset with a view to the subsequent disposal of it or of an interest in it.

• (2) Where expenditure falling within paragraph (a) of sub-paragraph (1) above is incurred partly for one or both of the purposes referred to in paragraph (b) of that sub-paragraph and partly for other purposes, only so much of that expenditure as it is just and reasonable to apportion to a purpose referred to in that paragraph shall be regarded as falling within those paragraphs.

• (3) References in the preceding provisions of this paragraph to the use of an asset in a way which gives rise, or is expected to give rise, to chargeable receipts include references to the provision, in connection with the use of that asset, of services or other business facilities of any kind which give rise, or are expected to give rise, to chargeable receipts.

• (4) To the extent only that expenditure falls within paragraphs (a) and (b) of sub-paragraph (1) above, the field asset to which the expenditure relates shall be regarded for the purposes of section 3 of the principal Act and section 3 of this Act as used in connection with the foreign field.

11

• (1) In the following provisions of this Schedule expenditure which falls within paragraphs (a) and (b) of sub-paragraph (1) of paragraph 10 above is referred to as “qualifying expenditure”.

• (2) In relation to qualifying expenditure, references in section 3 of the principal Act to tariff receipts shall be construed as references to chargeable receipts falling within paragraph (a) or paragraph (b) of subsection (1) of the principal section.

• (3) If, on the relevant assumptions . . ., expenditure which was incurred in relation to a field asset but which is not qualifying expenditure would have qualified for supplement as mentioned in subsection (5) of section 3 of the principal Act, then, in relation to qualifying expenditure which relates to that field asset, subsection (5A) of that section shall have effect with the omission of paragraph (a).

• (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (5) In relation to qualifying expenditure which is allowable expenditure within the meaning of Part II of Schedule 1 to this Act, in paragraph 8 of that Schedule—

• (a) any reference to disposal receipts shall be construed as a reference to chargeable receipts falling within subsection (1)(c) of the principal section; and

• (b) any reference to tariff receipts shall be construed as a reference to other descriptions of chargeable receipts.

Claims for expenditure relief

12

In relation to a claim for the allowance of any qualifying expenditure, and in relation to the foreign field in connection with which, by virtue of paragraph 10(4) above, the field asset concerned is to be regarded as used, the first claim period shall be the period ending on 30th June 1982 and each subsequent claim period shall be the period of six months from the end of the preceding claim period.

The responsible person

13

In relation to a foreign field, paragraph 4 of Schedule 2 to the principal Act shall have effect as if—

• (a) for sub-paragraphs (1) to (5) there were substituted the following sub-paragraph—

(1) For each oil field the Board may, by notice in writing given to him, appoint one of the participators in the field as the responsible person for that field, to perform in relation to the field, any functions conferred on the responsible person as such by this Part of this Act; and the participator who for the time being holds that appointment is in this Part of this Act referred to as “the responsible person”

;

• (b) in sub-paragraphs (6) and (7) for any reference to a body corporate or partnership there were substituted a reference to a participator; and

• (c) sub-paragraph (8) (which varies the definition of “participator” in relation to a United Kingdom field) were omitted.

Management and collection

14

• (1) In its application to tax chargeable only by virtue of the provisions of the principal section and this Schedule, Schedule 2 to the principal Act (in this paragraph referred to as “Schedule 2”) shall have effect as if—

• (a) any reference in that Schedule to an oil field or a participator were a reference only to a foreign field or, as the case may be, a participator in a foreign field, and

• (b) any reference in that Schedule to a chargeable period (within the meaning of Part I of the principal Act) were a reference only to a chargeable period within the meaning of this Schedule to which there are attributable any chargeable receipts of a participator in a foreign field,

and subject to the modifications made in the following provisions of this paragraph.

• (2) Notwithstanding anything in sub-paragraph (2) of paragraph 1 of Schedule 2, sub-paragraph (1) above shall have effect in relation to those provisions of the Taxes Management Act 1970 which are applied by that paragraph as it has effect in relation to Schedule 2 itself.

• (3) Paragraph 2 of Schedule 2 shall have effect as if for sub-paragraphs (2) and (3) there were substituted the following sub-paragraph—

(2) A return under this paragraph for a chargeable period shall contain the following particulars— (a) a statement of the amount or value and the source of any receipts which are, within the meaning of Schedule 4 to the Oil Taxation Act 1983, chargeable receipts of the participator attributable to the chargeable period to which the return relates; and (b) a statement of the assets giving rise to any such receipts; and (c) such other particulars as the Board may prescribe with respect to any such receipts

;

and accordingly subsections (1) to (3) of section 10 of this Act shall not apply in relation to a return made under that paragraph by virtue of this Schedule.

• (4) Paragraph 5 of Schedule 2 shall have effect as if for sub-paragraphs (2) and (2A) there were substituted the following sub-paragraph—

(2) A return under this paragraph shall contain such particulars of or relating to the oil field as the Board may require for the purpose of determining the amount by which any chargeable receipts, within the meaning of Schedule 4 to the Oil Taxation Act 1983, are to be treated as reduced by virtue of section 9 of that Act, as applied by paragraph 8(3) of that Schedule.

• (5) Paragraph 7(1) of Schedule 2 shall have effect with the omission of the words “or to oil won therefrom”, in both places where they occur.

• (6) Paragraph 14 of Schedule 2 shall have effect as if for sub-paragraphs (i) and (ii) of paragraph (b) of sub-paragraph (3) there were substituted the following sub-paragraphs—

(i) the aggregate of the receipts as stated in the participator’s return in pursuance of sub-paragraph (2)(a) of that paragraph; and (ii) the aggregate of the corresponding receipts as included in the assessment

;

and with the omission of sub-paragraphs (4) to (7).

Payment on account

15

In its application to tax chargeable only as mentioned in paragraph 14(1) above, paragraph 2 of the Schedule to the Petroleum Revenue Tax Act 1980 shall have effect as if, in place of the sub-paragraph (2A) set out in section 10(6) of this Act, there were substituted the following sub-paragraph—

(2A) The amount of any chargeable receipts, within the meaning of Schedule 4 to the Oil Taxation Act 1983, shall be taken from the particulars included in the return referred to in sub-paragraph (2) above, and any amount by which any of those receipts are to be treated as reduced under section 9 of that Act, as applied by paragraph 8(3) of that Schedule, shall be determined accordingly.

Income and corporation taxes

16

• (1) Section 11 of this Act shall have effect as if—

• (a) any reference therein to an oil field included a reference to a foreign field; and

• (b) any reference therein to a participator were to be construed, in relation to a foreign field, in accordance with subsection (2)(b) of the principal section; and

• (c) any reference therein to a tariff receipt included a reference to a chargeable receipt consisting of consideration received or receivable as mentioned in paragraph (a) or paragraph (b) of subsection (1) of the principal section.

• (2) Paragraphs (a) and (b) of sub-paragraph (1) above apply in relation to paragraph 11(3) of Schedule 2 to this Act in so far as that paragraph has effect for the purposes of section 11 of this Act by virtue of subsection (4) thereof.

SCHEDULE 5

Interpretation

1

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

Review for transitional claim period

2

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

No further reviews after the transitional claim period

3

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

Assets giving rise to tariff receipts

4

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

Re-opening past claim periods and chargeable periods

5

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

Expenditure on associated assets

6

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

Other claims for past expenditure

7

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

SCHEDULE 6

Expenditure incurred on non-dedicated mobile assets.

3A

• (1) This section applies where—

• (a) expenditure incurred on or after 1st January 2004 falls within section 3 (1) above, but

• (b) some of the use (or expected use) of the asset in relation to which the expenditure was incurred is use in a way that gives rise to tax-exempt tariffing receipts (see section 6A(2) below).

• (2) In any such case, such part of the expenditure as it is just and reasonable to apportion to the use mentioned in subsection (1)(b) above shall be excluded from the expenditure which is allowable as mentioned in section 3(4) above.

6A

• (1) An amount which is a tax-exempt tariffing receipt (see subsection (2) below) does not constitute a tariff receipt for the purposes of the Oil Taxation Acts.

• (2) An amount is a “ tax-exempt tariffing receipt ” for the purposes of the Oil Taxation Acts if—

• (a) it would, apart from this section, be a tariff receipt of a participator in an oil field,

• (b) it is received or receivable by the participator in a chargeable period ending on or after 30th June 2004 under a contract entered into on or after 9th April 2003, and

• (c) it is in respect of tax-exempt business (see subsection (3) below).

• (3) For the purposes of this section an amount is in respect of tax-exempt business if it is an amount received or receivable by a participator in an oil field in respect of—

• (a) the use of a qualifying asset, or

• (b) the provision of services or other business facilities of whatever kind in connection with the use, otherwise than by the participator himself, of a qualifying asset,

and that use of the qualifying asset falls within subsection (4) below.

• (4) Use of a qualifying asset falls within this subsection if it is—

• (a) use in relation to a new field (see subsection (5) below) or oil won from such a field, or

• (b) use in relation to a qualifying existing field (see subsection (5) below) or oil won from such a field, or

• (c) use in relation to a UK recommissioned field (see subsection (5) below) or oil won from such a field.

• (5) In this section—

• “ existing field ” means any oil field or foreign field which is not a new field;

• “ foreign field ” means, subject to subsection (6) below (treatment of transmedian fields), any hydrocarbon accumulation which is not under the jurisdiction of the government of the United Kingdom;

• “ licensee ”, in relation to a foreign field, means a person who has rights, interests or obligations in respect of the foreign field under a licence or other authority granted by the government of a country other than the United Kingdom;

• “ new field ” means— an oil field for no part of which had—consent for development been granted to a licensee by the Secretary of State before 9th April 2003; ora programme of development been served on a licensee or approved by the Secretary of State before that date; ora foreign field for no part of which had—any consent for development been granted to a licensee by the government of a country other than the United Kingdom before 9th April 2003; ora programme of development been served on a licensee or approved by such a government before that date; and subsections (4) and (5) of section 36 of the Finance Act 1983 (which define “ development ” for the purposes of subsections (2) and (3) of that section) shall apply also for the purposes of this definition;

• “ the Oil Taxation Acts ” means— Parts 1 and 3 of the principal Act;this Act; andany other enactment relating to petroleum revenue tax;

• “ qualifying existing field ” means an existing field as respects which the condition in section 6B(1) below is satisfied;

• “UK recommissioned field” means any oil field which is not a new field or qualifying existing field but as respects which the conditions in section 185(1A) of the Finance Act 1993 are satisfied (fields recommissioned after earlier decommissioning).

• (6) For the purposes of this section, in the case of an oil field which, by virtue of section 107 of the Finance Act 1980 (transmedian fields), is deemed to include the sector mentioned in subsection (1)(a)(ii) of that section—

• (a) that sector shall be treated as a foreign field, and

• (b) the remainder of that field shall be treated as a separate oil field.

• (7) In the application of provisions of the Oil Taxation Acts relating to tax-exempt tariffing receipts, references to oil, in relation to a foreign field, are references to any substance that would be oil within the meaning of the principal Act if the enactments mentioned in section 1(1) of that Act extended to the foreign field.

• (8) This section is subject to the transitional provisions in Part 2 of Schedule 37 to the Finance Act 2004 (expenditure incurred between 9th April and 31st December 2003: treatment of initial portion of tax-exempt tariffing receipts as tariff receipts).

6B

• (1) The condition for an existing field to be a qualifying existing field for the purposes of section 6A above is that at no time in the period of 6 years ending with 8th April 2003 (“the 6 year period”) was there—

• (a) any use of a disqualifying asset (see subsection (2) below) in a UK area (see subsection (11) below) in relation to the field or oil won from it, or

• (b) any provision of any services or other business facilities of whatever kind in connection with the use of a disqualifying asset in a UK area in relation to the field or oil won from it.

• (2) For the purposes of subsection (1) above “disqualifying asset”, in relation to an existing field and any time in the 6 year period, means an asset which at that time—

• (a) was a qualifying asset in relation to a participator in an oil field; and

• (b) was not an excepted asset (see subsection (3) below).

• (3) For the purposes of subsection (2) above “excepted asset”, in relation to an existing field and any time in the 6 year period, means any of the following—

• (a) any asset (other than a tanker) which at that time was wholly situated in the existing field;

• (b) any tanker which at that time was a non-dedicated tanker (see subsection (10) below) being used for transporting from the existing field oil which had been won from that field;

• (c) any asset which at that time was being used in relation to oil which had been won from the existing field and transported from that field by a non-dedicated tanker;

• (d) if the existing field is an oil field and is expected not to be a tanker loading field (see subsection (7) below)—

• (i) any tanker which at that time was a dedicated tanker (see subsection (9) below) being used for transporting from the existing field oil which had been won from that field;

• (ii) any asset which at that time was being used in relation to oil which had been won from the existing field and transported from that field by a dedicated tanker;

• (iii) any asset which at that time was being used to transport from the existing field oil consisting of gas won from that field to another oil field for the purpose of enabling that oil to be used for assisting the extraction of oil from that other field;

• (e) if at that time the existing field was not a taxable field, any asset by reference to which an election under section 231 of the Finance Act 1994 (election by reference to asset with excess capacity) was at that time in operation with respect to an oil field.

• (4) Where any use of an asset is, by virtue of subsection (3) above, use of an excepted asset, the provision of any services or other business facilities of whatever kind in connection with that use of that asset accordingly falls to be disregarded for the purposes of subsection (1)(b) above.

• (5) Where an asset in a UK area—

• (a) is a qualifying asset in relation to a participator in such an oil field as is mentioned in section 107 of the Finance Act 1980 (a “participator in the UK sector”), and

• (b) is also, by virtue of paragraph 3 of Schedule 4 to this Act, a chargeable asset in relation to a participator in a foreign field (a “participator in the foreign sector”),

subsection (6) below applies in relation to use of the asset in relation to the existing field or oil won from it.

• (6) Where this subsection applies, then, in determining for the purposes of subsection (1) above whether there has been any use of a disqualifying asset in relation to the existing field or oil won from it, any use of the asset in relation to that field or oil won from it shall be treated—

• (a) as use of a qualifying asset in relation to a participator in an oil field, if or to the extent that the use is attributable, on a just and reasonable basis, to a participator in the UK sector, or

• (b) as use of an asset which was not a qualifying asset in relation to a participator in an oil field, if or to the extent that the use is attributable, on a just and reasonable basis, to a participator in the foreign sector.

• (7) For the purposes of subsection (3) above, the existing field is expected not to be a tanker loading field if, at the time when the relevant contract is entered into, it is expected that all (or virtually all) of the oil (other than oil consisting of gas) to be won from that field and transported from it after the beginning of the operational period will be so transported otherwise than by tanker.

• (8) For the purposes of subsection (7) above—

• (a) “the relevant contract” means the contract mentioned in section 6A(2)(b) above; and

• (b) “the beginning of the operational period” means the time at which the qualifying asset to which that contract relates begins to be used under that contract in relation to the existing field or oil won from that field.

• (9) For the purposes of subsection (3) above a tanker is a dedicated tanker at any time if—

• (a) the existing field mentioned in that subsection is an oil field, and

• (b) at that time the tanker is a mobile asset dedicated to that oil field (see section 2 above).

• (10) For the purposes of subsection (3) above a tanker is a non-dedicated tanker—

• (a) at any time, if the existing field mentioned in that subsection is not an oil field, or

• (b) where that field is an oil field, at any time when the tanker is not a mobile asset dedicated to that oil field.

• (11) In this section “UK area” means each of the following—

• (a) the United Kingdom;

• (b) the territorial sea of the United Kingdom;

• (c) a designated area, to the extent that it does not fall to be treated by virtue of section 6A(6) above as a foreign field.

• (12) This section shall be construed as one with section 6A above.

7A

• (1) Where this section applies, the amount or value (apart from this section) of any disposal receipts of the participator (“the disponor”) in respect of the disposal shall be reduced in accordance with the following provisions of this section.

• (2) The reduction is to be made by multiplying that amount or value by the fraction that is equal to—

1 - T/A

$1-TA$

• (3) In that formula—

T is the aggregate of the tax-exempt tariffing use of the asset in the reference period by—

• (a) the disponor, so far as referable to the interest disposed of, and

• (b) each of the previous owners, so far as referable to that previous owner’s represented interest, and

A is the aggregate of all use of the asset in the reference period by—

• (a) the disponor, so far as referable to the interest disposed of, and

• (b) each of the previous owners, so far as referable to that previous owner’s represented interest,

but only taking into account for this purpose use of the asset by a person at a time when he is or was a participator in a taxable field.

• (4) For the purposes of this section—

• “the interest disposed of” means the asset, or the interest in an asset, the disposal of which gives rise to the disposal receipts mentioned in subsection (1) above;

• “previous owner” means any person from whom the disponor directly or indirectly derives his title to the whole or any part of the interest disposed of;

• “the reference period” means the shorter of the following periods ending with the date of the disposal—the period of 6 years; orthe period beginning with the bringing into existence of the asset;

• “represented interest”, in the case of a previous owner, means so much of the interest which that previous owner had in the asset as is represented in the interest disposed of;

• “tax-exempt tariffing use”, in relation to an asset, means use of the asset in a way that gives rise to tax-exempt tariffing receipts.

• (5) Any apportionment that falls to be made for the purpose of determining a previous owner’s represented interest shall be made using a method which is just and reasonable, having regard to—

• (a) the proportion of any person’s interest that was acquired from any particular person, and

• (b) the proportion of any person’s interest that was transferred to any particular person.

• (6) Where—

• (a) the disponor or any previous owner acquired the asset or an interest in the asset from another person, and

• (b) on that other person’s corresponding disposal of the asset or interest a reduction was made by virtue of this section,

use of the asset shall not be brought into account in determining T or A in the formula in subsection (2) above to the extent that it was so brought into account in relation to that corresponding disposal.

• (7) Where paragraph 9 of Schedule 2 to this Act (reduction of disposal receipts in respect of brought-in assets) applies in relation to an asset, no account shall be taken for the purposes of this section of any use of the asset during the initial period.

In this subsection “the initial period”, in relation to an asset, has the same meaning as it has in relation to that asset in paragraph 7 of Schedule 1 to this Act (restriction on allowable expenditure on brought-in asset).

• (8) For the purposes of this section, the amount of use of an asset—

• (a) where the use is in relation to oil, is to be determined by reference to the volume of oil in relation to which the asset is used, and

• (b) where the use is otherwise than in relation to oil, is to be determined on a just and reasonable basis.

• (9) For the purposes of this section, the extent to which use of an asset is referable to—

• (a) the interest disposed of, or

• (b) the represented interest of a previous owner,

shall be determined on a just and reasonable basis, having regard to the size of the interest in question and the size from time to time of the whole interest in the asset of the disponor or, as the case may be, that previous owner.

Tariff receipts allowance.

Returns relating to tariff and disposal receipts.

Transfer of interests in fields

The participator’s share

Editorial notes