Finance Bill

House of Commons

Session 2008 - 09
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Finance Bill

Finance Bill
Schedule 40 — Oil: chargeable gains
Part 1 — Licence swaps
317

195E
Company that gives mixed consideration
(1)
This section applies to a mixed-consideration swap.
(2)
Subsections (3) to (5) apply to the company that gives the mixed
consideration (“company G”).
(3)
Company G is to be treated as if it had acquired the other company’s
5
licence for a consideration of the amount equal to—

C + N


(4)
The disposal by company G 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 G is not a no
gain/no loss disposal for the purposes of section 56.
10
(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 R”) subsequently
disposes of it, company G’s acquisition of the licence is to be treated
as company R’s acquisition of it.
15
(7)
For the purposes of this section—
C is the amount of non-licence consideration given by company
G, and
N is company G’s no gain/no loss amount.”
6     (1)
Section 196 (interpretation of sections 194 and 195) is amended as follows.
20
      (2)
In the heading, for “and 195” substitute “to 195E”.
      (3)
After subsection (1A) insert—
“(1B)
In sections 195A to 195E, a reference to a UK licence that relates to a
developed area is a reference to any UK licence apart from one that
relates to an undeveloped area.”
25
      (4)
In subsection (2), for “and (1A)” substitute “to (1B)”.
      (5)
In subsection (3), after “(1)” insert “or (1B)”.
      (6)
In subsection (5)—
(a)
for “and 195” substitute “to 195E”,
(b)
after the definition of “licence” insert—
30
““licence-only swap” has the meaning given in section
195A(2);”, and
(c)
after the definition of “licensee” insert—
““mixed consideration” means consideration that
consists partly of disposal of a UK licence;
35
“mixed-consideration swap” has the meaning given in
section 195A(2);
“no gain/no loss amount”, in relation to a company that
disposes of a UK licence, means the amount that
would be taken to be the consideration for the
40
disposal if section 56(2) applied to the disposal;

Finance Bill
Schedule 40 — Oil: chargeable gains
Part 2 — Reinvestment of ring fence assets
318

“non-licence consideration” means consideration that
does not consist of disposal of a UK licence;”.
7
In Schedule 3 (assets held on 31 March 1982), in paragraph 1(2) (meaning of
no gain/no loss disposal), after “provisions” insert “or any of sections 195B,
195C or 195E”.
5
8
The amendments made by this Part have effect in relation to disposals made
on or after 22 April 2009.
Part 2
Reinvestment of ring fence assets
Amendment of TCGA 1992
10
9
TCGA 1992 is amended as follows.
Roll-over relief
10
In section 198 (replacement of business assets used in connection with oil
fields), for subsection (3) substitute—
“(3)
Where—
15
(a)
section 152 or 153 applies in relation to any of the
consideration on a material disposal, and
(b)
the asset which constitutes the new assets for the purposes of
that section is a depreciating asset,

section 154(2)(b) is to have effect as if the reference to a trade carried
20
on by the claimant were a reference solely to the claimant’s ring fence
trade.”
Alternative to roll-over relief
11
In section 198 (replacement of business assets used in connection with oil
fields), after subsection (2) insert—
25
“(2A)
But subsection (1) is subject to section 198A(3)(a).”
12
After that section insert—
“198A
  Ring fence reinvestment: whole consideration reinvested
(1)
This section applies if a person (“P”) makes a disposal and
acquisition which—
30
(a)
is a ring fence reinvestment, and
(b)
qualifies for roll-over relief.
(2)
P may make a claim under this section in relation to the disposal and
acquisition.
(3)
If P makes a claim under this section—
35
(a)
section 152 does not apply to any of the disposal
consideration, and
(b)
any gain accruing to P on the disposal is not a chargeable
gain.

Finance Bill
Schedule 40 — Oil: chargeable gains
Part 2 — Reinvestment of ring fence assets
319

(4)
In this section “disposal consideration” means the whole of the
consideration obtained on the disposal made by P.
198B
Ring fence reinvestment: part of consideration reinvested
(1)
This section applies if a person (“P”) makes a disposal and
acquisition which—
5
(a)
is a ring fence reinvestment, and
(b)
qualifies for section 153 relief.
(2)
P may make a claim under this section in relation to the disposal and
acquisition.
(3)
If P makes a claim under this section—
10
(a)
section 153(1)(a) applies in relation to P and the disposal, but
(b)
section 153(1)(b) does not apply to P and the acquisition.
198C
Provisional application of sections 198A and 198B
(1)
This section applies where a person (“P”) carrying on a ring fence
trade who for a consideration disposes of, or of an interest in, any
15
assets (“the old assets”) declares, in P’s return for the chargeable
period in which the disposal takes place—
(a)
that the whole or any specified part of the consideration will
be applied in the acquisition of, or of an interest in, other
assets (“the new assets”),
20
(b)
that the acquisition will take place as mentioned in section
152(3),
(c)
that the disposal and acquisition will be a ring fence
reinvestment,
(d)
that P intends to make a claim under section 198A or 198B in
25
relation to the disposal and acquisition, and
(e)
that P has not made, and will not make, a declaration under
section 153A in relation to the disposal and acquisition.
(2)
Until the declaration ceases to have effect, section 198A or 198B
applies as if the acquisition had taken place and the person had made
30
a claim under that section.
(3)
The declaration ceases to have effect as follows—
(a)
if and to the extent that it is withdrawn before the relevant
day, or is superseded before that day by a valid claim made
under section 198A or 198B, on the day on which it is so
35
withdrawn or superseded, and
(b)
if and to the extent that it is not so withdrawn or superseded,
on the relevant day.
(4)
On the declaration ceasing to have effect in whole or in part, all
necessary adjustments—
40
(a)
are to be made by making or amending assessments or by
repayment or discharge of tax, and
(b)
are to be so made despite any limitation on the time within
which assessments or amendments may be made.
(5)
If—
45
(a)
P makes a declaration under this section, and

Finance Bill
Schedule 40 — Oil: chargeable gains
Part 2 — Reinvestment of ring fence assets
320

(b)
the disposal and acquisition is not a ring fence reinvestment,
but qualifies for roll-over relief or section 153 relief,

on P making a claim, the declaration is to have effect as also a
declaration under section 153A.
(6)
In this section “the relevant day” means—
5
(a)
in relation to capital gains tax, the third anniversary of the
31st January next following the year of assessment in which
the disposal of, or of the interest in, the old assets took place,
and
(b)
in relation to corporation tax, the fourth anniversary of the
10
last day of the accounting period in which that disposal took
place.
(7)
Section 152(6), (10) and (11) apply for the purposes of this section as
they apply for the purposes of section 152.
198D
No double claims
15
(1)
If P makes a claim under section 198A or 198B, no other relevant
claim may be made in respect of the relevant acquisition.
(2)
P may make a claim under section 198A or 198B (“the new claim”), if
P has previously made a claim under section 152 or 153 (“the
previous claim”) in respect of the relevant acquisition.
20
(3)
But P may make the new claim only if the previous claim is
withdrawn at or before the time the new claim is made.
(4)
If the new claim is made in accordance with subsections (2) and (3),
all necessary adjustments—
(a)
are to be made by making or amending assessments or by
25
repayment or discharge of tax, and
(b)
are to be so made despite any limitation on the time within
which assessments or amendments may be made.
(5)
In this section—
“relevant acquisition” means the acquisition of the new assets
30
that is comprised in the disposal and acquisition to which a
claim under section 198A or 198B or declaration under
section 198C relates;
“relevant claim” means a claim under section 152, 153, 198A or
198B.
35
198E
Ring fence reinvestments
(1)
This section applies for the purposes of sections 198A to 198C.
(2)
A disposal and acquisition is a ring fence reinvestment if—
(a)
the disposal was—
(i)
a material disposal, or
40
(ii)
a disposal of a UK licence which relates to an
undeveloped area,
(b)
the old assets were used only for the purposes of P’s ring
fence trade,
(c)
the new assets are taken into use, and used only, for the
45
purposes of P’s ring fence trade, and

Finance Bill
Schedule 40 — Oil: chargeable gains
Part 2 — Reinvestment of ring fence assets
321

(d)
the new assets are oil assets.
(3)
Each of the following is an “oil asset” for the purposes of this
section—
(a)
an interest in oil to be won from an oil field,
(b)
an asset used in connection with an oil field,
5
(c)
a structure which is to be placed on the seabed of the United
Kingdom continental shelf,
(d)
an asset used wholly in the winning of oil, or in the
measuring of oil won, in the United Kingdom otherwise than
from an oil field,
10
(e)
an asset used for the initial treatment or storage of oil in the
United Kingdom,
(f)
an asset used for the transportation of oil from an oil field to
the United Kingdom, and
(g)
a UK licence which relates to an undeveloped area.
15
(4)
Section 12 of the Oil Taxation Act 1975 (interpretation of Part 1 of that
Act) applies for the interpretation of subsection (3)(a) to (f).
(5)
Expressions used in this section and in section 152 have the same
meanings in this section as in section 152.
(6)
In this section a reference to a UK licence which relates to an
20
undeveloped area has the same meaning as in section 194 (see section
196).
(7)
In this section—
“material disposal” has the meaning given in section 197;
“ring fence trade” has the meaning given in section 198.
25
198F
Qualification for roll-over relief
(1)
This section applies for the purposes of sections 198A and 198B and
section 198G.
(2)
A disposal and acquisition qualifies for roll-over relief if—
(a)
the consideration for the disposal is applied in an acquisition
30
as mentioned in section 152(1), and
(b)
section 152(1)(a) and (b) would apply to the disposal and
acquisition if the appropriate claim were made.
(3)
Subsections (4) to (6) apply in deciding whether a disposal and
acquisition is one that qualifies for roll-over relief.
35
(4)
Section 152(8) is to be disregarded.
(5)
Section 198A is to be disregarded.
(6)
Subject to subsections (4) to (5), all the circumstances are to be taken
into account, including section 153(1) and section 198(1) and (2).
198G
Qualification for section 153 relief
40
(1)
This section applies for the purposes of sections 198A and 198B.
(2)
A disposal and acquisition qualifies for section 153 relief if—

Finance Bill
Schedule 41 — Oil assets put to other uses
Part 1 — Petroleum revenue tax
322

(a)
section 153(1) applies to part of the amount or value of the
consideration for the disposal,
(b)
section 153(1)(a) and (b) would apply to the disposal and
acquisition if the appropriate claim were made, and
(c)
the disposal and acquisition would qualify for roll-over relief
5
but for the disapplication of section 152(1) by section 153(1).
(3)
Subsections (4) to (6) apply in deciding whether a disposal and
acquisition is one that qualifies for section 153 relief.
(4)
Section 153(2) has effect subject to section 198F(4) and (5).
(5)
Section 198B is to be disregarded.
10
(6)
Subject to subsections (4) and (5), all the circumstances are to be
taken into account, including section 198(1).”
13
The amendments made by this Part have effect in relation to disposals made
on or after 22 April 2009 (whether the acquisition in which the consideration
is reinvested takes place before, on or after that date).
15
Schedule 41
Section 86

Oil assets put to other uses
Part 1
Petroleum revenue tax
Allowance of decommissioning and restoration expenditure
20
1     (1)
Section 3 of OTA 1975 (allowance of expenditure) is amended as follows.
      (2)
In subsection (1C)(b), for “in connection with the field” substitute “for a
qualifying purpose”.
      (3)
In subsection (1D), for “in connection with the field” substitute “for a
qualifying purpose”.
25
      (4)
After that subsection insert—
“(1DA)
In subsections (1C) and (1D) a reference to use for a qualifying
purpose is a reference to—
(a)
use in connection with the taxable field mentioned in
subsection (1C), and
30
(b)
other use in—
(i)
the United Kingdom,
(ii)
the territorial sea of the United Kingdom, or
(iii)
a designated area,

except use wholly or partly for an ineligible oil purpose.
35
(1DB)
In subsection (1DA)(b) the reference to use for an ineligible oil
purpose is a reference to—
(a)
use in connection with an oil field other than the taxable field
mentioned in subsection (1C), and

Finance Bill
Schedule 41 — Oil assets put to other uses
Part 1 — Petroleum revenue tax
323

(b)
use for any other purpose (apart from a purpose falling
within section 3(1)(b)) of a separate trade consisting of
activities falling within section 492(1) of the Income and
Corporation Taxes Act 1988.
(1DC)
In subsections (1DA) and (1DB) a reference to use in connection with
5
a taxable field or other oil field includes use giving rise to receipts
which, for the purposes of the Oil Taxation Act 1983, are tariff
receipts.”
Amounts which are not chargeable tariff receipts
2     (1)
Section 6 of OTA 1983 (amounts which are not chargeable tariff receipts) is
10
amended as follows.
      (2)
In subsection (4)—
(a)
in paragraph (b), insert at the end “or”, and
(b)
after that paragraph insert—
“(c)
is referable to other use of an asset, except use wholly
15
or partly for an oil purpose,”.
      (3)
After that subsection insert—
“(4A)
In this section the reference to use of an asset for an oil purpose is a
reference to—
(a)
use in connection with an oil field, and
20
(b)
use for any other purpose (apart from a purpose falling
within section 3(1)(b) of the principal Act) of a separate trade
consisting of activities falling within section 492(1) of the
Income and Corporation Taxes Act 1988.
(4B)
In subsection (4A) the reference to use in connection with an oil field
25
includes use giving rise to receipts which, for the purposes of this
Act, are tariff receipts.”
No reduction of allowable expenditure
3     (1)
Paragraph 8 of Schedule 1 to OTA 1983 (allowable expenditure: use of new
asset otherwise than in connection with taxable field) is amended as follows.
30
      (2)
In sub-paragraph (1)(a) and (b), for “in connection with a taxable field”
substitute “for a qualifying purpose”.
      (3)
After sub-paragraph (2) insert—
   “(2A)
In sub-paragraph (1) a reference to use for a qualifying purpose is
a reference to—
35
(a)
use in connection with a taxable field, and
(b)
other use in—
(i)
the United Kingdom,
(ii)
the territorial sea of the United Kingdom, or
(iii)
a designated area,
40

except use wholly or partly for an ineligible oil purpose.
     (2B)
In this Act a reference to use of an asset for an ineligible oil
purpose is a reference to—