Finance Bill

House of Commons

Session 2002 - 03
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Other Bills before Parliament

Finance Bill

Finance Bill
Part 4 — Pension schemes etc
Chapter 8 — Supplementary
232

serious ill-health lump sum
paragraph 4 of

Schedule 29

short service refund lump sum
paragraph 5 of

Schedule 29

sponsoring employer
section 147(6)

5

standard lifetime allowance
section 214(2) and (3)

sums and assets held for the purposes
section 273(3)

of an arrangement

tax year
section 273(1)

the tax year 2006-07 etc.
section 273(1)

10

total income
section 835 of ICTA

total pension input amount
section 225

transfer lump sum death benefit
paragraph 19 of

Schedule 29

trivial commutation lump sum
paragraph 7 of

15

Schedule 29

unauthorised employer payment
section 157(4)

unauthorised member payment
section 157(2)

unauthorised payment
section 157(5)

unauthorised payments charge
section 204(1)

20

unauthorised payments surcharge
section 205(1)

uncrystallised funds lump sum death
paragraph 15 of

benefit
Schedule 29

unsecured pension fund lump sum
paragraph 17 of

death benefit
Schedule 29

25

valuation assumptions (in relation to a
section 271

person)

winding-up lump sum
paragraph 10 of

Schedule 29

winding-up lump sum death benefit
paragraph 21 of

30

Schedule 29

Other supplementary provisions
275
Minor and consequential amendments
(1)
Schedule 33 contains minor and consequential amendments of enactments in
consequence of, or otherwise in connection with, this Part.
35

Finance Bill
Part 5 — Oil
233

(2)
The Treasury may by order make such other amendments (including repeals
and revocations) as may appear appropriate in consequence of, or otherwise in
connection with, this Part—
(a)
in any enactment contained in an Act passed before 6th April 2006 or in
the Session in which that date falls, and
5
(b)
in any instrument made before that date or in the Session in which that
date falls.
(3)
An order under subsection (2) may include any transitional provisions or
savings appearing to the Treasury to be appropriate.
276
Orders and regulations
10
(1)
Any power of the Treasury or the Board of Inland Revenue to make any order
or regulations under this Part is exercisable by statutory instrument.
(2)
Any statutory instrument containing any order or regulations made by the
Treasury or the Board of Inland Revenue under this Part is subject to
annulment in pursuance of a resolution of the House of Commons.
15
277
Transitionals and savings
(1)
Schedule 34 contains miscellaneous transitional provisions and savings.
(2)
The Treasury may by order make any other transitional provision which may
appear appropriate in consequence of, or otherwise in connection with, this
Part or the repeals made by this Act in consequence of this Part.
20
(3)
An order under subsection (2) may, in particular, include savings from the
effect of any amendment made by this Part or any repeal made by this Act in
consequence of this Part.
(4)
Nothing in Schedule 34 limits the power conferred by subsection (2).
(5)
Nothing in that Schedule or in any provision made by virtue of subsection (2)
25
prejudices the operation of sections 16 and 17 of the Interpretation Act 1978
(c. 30) (effect of repeals).
278
Commencement
(1)
Chapters 3 to 7 and section 275 (with Schedule 33) do not come into force until
6th April 2006.
30
(2)
But any power to make an order or regulations under any of those provisions
may be exercised at any time after this Act is passed.
Part 5
Oil
279
Certain receipts not to be tariff receipts
35
(1)
The Oil Taxation Act 1983 (c. 56) is amended as follows.
(2)
In section 6(2) (meaning of tariff receipts) after “Subject to the provisions of this
section” insert “and section 6A below”.

Finance Bill
Part 5 — Oil
234

(3)
After section 6 insert—
“6A
Tax-exempt tariffing receipts
(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.
5
(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
10
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
15
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,
20

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)
25
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
30
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
35
under a licence or other authority granted by the government of
a country other than the United Kingdom;

“new field” means—
(a)
an oil field for no part of which had—
(i)
consent for development been granted to a licensee
40
by the Secretary of State before 9th April 2003; or
(ii)
a programme of development been served on a
licensee or approved by the Secretary of State
before that date; or
(b)
a foreign field for no part of which had—
45
(i)
any consent for development been granted to a
licensee by the government of a country other than
the United Kingdom before 9th April 2003; or

Finance Bill
Part 5 — Oil
235

(ii)
a 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
5
(2) and (3) of that section) shall apply also for the purposes of
this definition;

“the Oil Taxation Acts” means—
(a)
Parts 1 and 3 of the principal Act;
(b)
this Act; and
10
(c)
any 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.
(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
15
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-
20
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
25
35 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
The condition for being a qualifying existing field
(1)
The condition for an existing field to be a qualifying existing field for
30
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
35
(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
40
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
45
an existing field and any time in the 6 year period, means any of the
following—

Finance Bill
Part 5 — Oil
236

(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;
5
(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)—
10
(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
15
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
20
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
25
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
30
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
35
(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.
40
(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
45
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
50
the foreign sector.

Finance Bill
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237

(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
5
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
10
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—
15
(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—
20
(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—
25
(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.”.
30
(4)
In Schedule 2 (supplemental provisions in relation to receipts from qualifying
assets) in paragraph 12 (purchase at place of extraction)—
(a)
in sub-paragraph (1), for “Subject to sub-paragraphs (4) and (5)”
substitute “Subject to sub-paragraphs (4) to (6)”, and
(b)
at the end of the paragraph add—
35
“(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
40
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.”.
(5)
Schedule 35 to this Act has effect; and in that Schedule—
45

Part 1 makes amendments to the Oil Taxation Act 1983 (c. 56) relating to
allowable expenditure and disposal receipts;

Finance Bill
Part 5 — Oil
238


Part 2 makes transitional provision;

Part 3 makes amendments to the Taxes Act 1988;

Part 4 makes amendments to other enactments.
(6)
In Part 1 of Schedule 35 to this Act—
(a)
the amendments made by paragraph 5 (which relate to disposal
5
receipts) have effect in relation to disposals in chargeable periods
ending on or after 30th June 2004, and
(b)
the other amendments made by that Part have effect in relation to
expenditure incurred on or after 1st January 2004.
(7)
The amendments made by Part 3 of that Schedule have effect in relation to
10
chargeable periods, within the meaning of the Taxes Act 1988, ending on or
after 1st January 2004.
(8)
The amendments made by Part 4 of that Schedule have effect in relation to
chargeable periods (within the meaning of section 98 of the Finance Act 1999
(c. 16)) ending on or after 30th June 2004.
15
280
Petroleum extraction activities: exploration expenditure supplement
(1)
Chapter 5 of Part 12 of the Taxes Act 1988 (petroleum extraction activities) is
amended as follows.
(2)
After section 496 (tariff receipts) insert—
“496A
Exploration expenditure supplement
20
Schedule 19B to this Act (exploration expenditure supplement) shall
have effect.”.
(3)
Before Schedule 20 insert the Schedule 19B set out in Schedule 36 to this Act.
281
Restrictions on expenditure allowable
(1)
In Schedule 4 to the Oil Taxation Act 1975 (c. 22), paragraph 2 (restrictions on
25
expenditure allowable where acquisition etc from connected person or
otherwise not at arm’s length) is amended as follows.
(2)
In sub-paragraph (1), for the words following paragraph (b) (which limit the
expenditure allowable to the cost in a transaction to which paragraph 2 does
not apply) substitute—
30

“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.”.
(3)
After sub-paragraph (1) insert—
“(1ZA)
Those amounts are—
35
(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
40
value of, the asset;