Finance Bill

House of Commons

Session 2008 - 09
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Finance Bill

Finance Bill
Schedule 39 — PRT: blended oil
313

“oil” includes any substance which would be oil if the
enactments mentioned in section 1(1) of the principal Act
extended to a foreign field;
“oil field” includes a foreign field;
“oil taxation legislation” means Part 1 of the principal Act and
5
any enactment construed as one with that Part;
“originating fields”, in relation to any blended oil, means the oil
fields from which oil which has been mixed as mentioned in
subsection (1);
“relevant participator” means a person who is a participator in
10
the relevant field at any time in the relevant period.”
3     (1)
Schedule 12 (supplementary provisions as to blended oil) is amended as
follows.
      (2)
For paragraphs 1 and 2 (and the headings before them) substitute—
“Interpretation
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1     (1)
In this Schedule—
“HMRC” means Her Majesty’s Revenue and Customs;
“method of allocation” means a method for making an
allocation of blended oil for the purposes of section 63 that
has been selected by the participators in the originating
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fields (including such a method that has been amended in
accordance with this Schedule).
      (2)
In this Schedule a reference to a suitable method of allocation is a
reference to a method which secures that allocation of blended oil
is just and reasonable (for the purposes of the oil taxation
25
legislation).
Method of allocation not suitable
2     (1)
This paragraph applies if it appears to HMRC that—
(a)
a method of allocation that has been used in respect of a
chargeable period was not suitable, or
30
(b)
a method of allocation that is proposed to be used in
respect of a chargeable period would not be suitable.
      (2)
HMRC may give notice to each of the participators in the
originating fields—
(a)
informing the participators of what appears to HMRC to
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be the case, and
(b)
proposing amendments to the method of allocation.
      (3)
If HMRC give notice, the allocation of the blended oil for the
purposes of section 63 in respect of the chargeable period is to be
redetermined, or determined, using the method of allocation as
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amended in accordance with the notice.
      (4)
Sub-paragraph (3) is subject to—
(a)
the following provisions of this Schedule,
(b)
any subsequent notice given under this paragraph, and

Finance Bill
Schedule 40 — Oil: chargeable gains
Part 1 — Licence swaps
314

(c)
any amendment to the method of allocation made by the
participators in the originating fields.”
      (3)
In paragraph 3(1)—
(a)
for “the Board” (in each place) substitute “HMRC”, and
(b)
for “paragraph 2(a)” substitute “paragraph 2(2)”.
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      (4)
In paragraph 3(2), for “the Board” (in each place) substitute “HMRC”.
      (5)
After paragraph 3(2) insert—
    “(3)
If the method of allocation is amended in accordance with this
paragraph, the allocation of the blended oil for the purposes of
section 63 in respect of the chargeable period is to be
10
redetermined, or determined, using the method of allocation as so
amended.
      (4)
Sub-paragraph (3) is subject to—
(a)
any subsequent notice given under this paragraph, and
(b)
any amendment to the method of allocation made by the
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participators in the originating fields.”
      (6)
Omit paragraph 4.
4
The amendments made by this Schedule have effect in relation to chargeable
periods beginning after 30 June 2009.
Schedule 40
20
Section 85

Oil: chargeable gains
Part 1
Licence swaps
1
TCGA 1992 is amended as follows.
2
In section 35(3) (assets held on 31 March 1982 (including assets held on 6
25
April 1965)—
(a)
in paragraph (c), omit the “or” at the end, and
(b)
after that paragraph insert—
“(ca)
where, by virtue of section 195B, 195C or 195E, neither
a gain nor a loss accrues to the person making the
30
disposal, or”.
3
In section 55 (assets owned on 31 March 1982 or acquired on a no gain/no
loss disposal), after subsection (5) insert—
“(5A)
For the purposes of subsection (5), a disposal is also a no gain/no loss
disposal if it is one on which, by virtue of section 195B, 195C or 195E,
35
neither a gain nor a loss accrues to the person making the disposal;
but, in such a case, subsection (6)(b) below does not apply.”
4
In section 175(2C)(b) (replacement of business assets by members of a
group), after “applies” insert “or is one where, by virtue of section 195B,

Finance Bill
Schedule 40 — Oil: chargeable gains
Part 1 — Licence swaps
315

195C or 195E, neither a gain nor a loss accrues to the person making the
disposal”.
5
After section 195 insert—
“195A
  Oil licence swaps
(1)
Sections 195B to 195E apply for the purposes of corporation tax on
5
chargeable gains.
(2)
In those sections—
“licence-only swap” means a case where conditions A, B, and C
are met;
“mixed-consideration swap” means a case where conditions A,
10
B and D are met.
(3)
Condition A is that a company (“company A”) disposes of a UK
licence that relates to a developed area (“licence A”) to another
company (“company B”), by way of a bargain at arm’s length.
(4)
Condition B is that company B disposes of another UK licence that
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relates to a developed area (“licence B”) to company A, by way of a
bargain at arm’s length.
(5)
Condition C is that both—
(a)
the disposal of licence A is the only consideration given for
the disposal of licence B, and
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(b)
the disposal of licence B is the only consideration given for
the disposal of licence A.
(6)
Condition D is that either—
(a)
the disposal of licence A is the only consideration given for
the disposal of licence B, or
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(b)
the disposal of licence B is the only consideration given for
the disposal of licence A;

(and accordingly the disposal of one of the licences is part of the
consideration given for the disposal of the other licence).
(7)
In this section and sections 195B to 196 a reference to disposal of a UK
30
licence includes—
(a)
a disposal of an interest in a UK licence, and
(b)
a disposal of a UK licence, or an interest in a UK licence, only
so far as the licence relates to part of the licensed area.
195B
Licence-only swap
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(1)
This section applies to a licence-only swap.
(2)
Company A is to be treated—
(a)
as if it had disposed of licence A for a consideration of such
amount as to secure that on the disposal neither a gain nor a
loss accrues to the company, and
40
(b)
as if it had acquired licence B for a consideration of the same
amount.
(3)
Company B is to be treated—

Finance Bill
Schedule 40 — Oil: chargeable gains
Part 1 — Licence swaps
316

(a)
as if it had disposed of licence B for a consideration of such
amount as to secure that on the disposal neither a gain nor a
loss accrues to the company, and
(b)
as if it had acquired licence A for a consideration of the same
amount.
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195C
Company that receives mixed consideration: N exceeds C
(1)
This section applies to a mixed-consideration swap.
(2)
Subsections (3) to (5) apply to the company that receives the mixed
consideration (“company R”), but only if N exceeds C.
(3)
Company R is to be treated as if it had acquired the other company’s
10
licence for a consideration of the amount equal to—

N - C


(4)
The disposal by company R of its licence is to be taken to be one on
which neither a gain nor a loss accrues.
(5)
But (despite subsection (4)), the disposal by company R is not a no
gain/no loss disposal for the purposes of section 56.
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(6)
For the purposes of the application of sections 53 and 54, any
enactment is to be disregarded insofar as it provides that, if the other
company which acquires the licence (“company G”) subsequently
disposes of it, the company R’s acquisition of the licence is to be
treated as company G’s acquisition of it.
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(7)
For the purposes of this section—
C is the amount of non-licence consideration received by
company R;
N is company R’s no gain/no loss amount.
195D
Company that receives mixed consideration: N does not exceed C
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(1)
This section applies to a mixed-consideration swap.
(2)
It applies to the company that receives the mixed consideration
(“company R”), but only if N does not exceed C.
(3)
If N is less than C, company R is to be treated—
(a)
as if a gain had arisen on the disposal of its licence of an
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amount equal to—

C - N, and


(b)
as if company R had acquired the other company’s licence for
nil consideration.
(4)
If N is equal to C, company R is to be treated—
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(a)
as if the disposal of its licence is one on which neither a gain
nor a loss accrues, and
(b)
as if it had acquired the other company’s licence for nil
consideration.
(5)
For the purposes of this section—
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C is the amount of non-licence consideration received by
company R, and
N is company R’s no gain/no loss amount.