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Finance Bill
Schedule 41 — Oil assets put to other uses
Part 2 — Capital allowances

324

 

(a)   

use in connection with an oil field that is not a taxable field,

and

(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

5

the Income and Corporation Taxes Act 1988.

     (2C)  

In sub-paragraphs (2A) and (2B) a reference to use in connection

with a taxable field or other oil field includes use giving rise to

receipts which, for the purposes of this Act, are tariff receipts.”

Commencement

10

4          

The amendments made by this Part have effect in relation to chargeable

periods beginning after 30 June 2009.

Part 2

Capital allowances

General decommissioning expenditure

15

5     (1)  

Section 163 of CAA 2001 (meaning of “general decommissioning

expenditure”) is amended as follows.

      (2)  

In subsection (3)(a), after “use” insert “wholly or partly”.

      (3)  

In subsection (4ZA), for paragraphs (a) and (b) substitute—

“(a)   

was not brought into use wholly for qualifying purposes, or

20

(b)   

has, at any time since it was brought into use, not been used

wholly for qualifying purposes.”

      (4)  

In subsection (4ZC), for “the purposes of the ring fence trade” substitute

“qualifying purposes”.

      (5)  

After subsection (4C) insert—

25

“(4D)   

In this section a reference to use for qualifying purposes is a reference

to—

(a)   

use for the purposes of any ring fence trade of any person, or

(b)   

other use in—

(i)   

the United Kingdom,

30

(ii)   

the territorial sea of the United Kingdom, or

(iii)   

an area designated under section 1(7) of the

Continental Shelf Act 1964,

   

except use wholly or partly in connection with an oil field

(within the meaning given by section 12(2) of the Oil Taxation

35

Act 1975).”

6          

In section 165(4A) of CAA 2001 (general decommissioning expenditure after

ceasing ring fence trade), for “abandonment expenditure” substitute

“general decommissioning expenditure”.

 
 

Finance Bill
Schedule 42 — PRT: former licensees and former oil fields
Part 1 — Persons who cease to be licensees because of cessation events

325

 

Commencement

7     (1)  

The amendments made by paragraph 5 have effect in relation to expenditure

incurred on or after 22 April 2009.

      (2)  

The amendment made by paragraph 6 has effect in relation to ring fence

trades that cease to be carried on or after 12 March 2008.

5

Schedule 42

Section 87

 

PRT: former licensees and former oil fields

Part 1

Persons who cease to be licensees because of cessation events

1          

OTA 1975 is amended as follows.

10

2     (1)  

Section 12 (interpretation of Part 1) is amended as follows.

      (2)  

In subsection (1), in the definition of “participator”—

(a)   

for “any”, in the first place, substitute “a”,

(b)   

after that paragraph insert—

“(aa)   

a person who is no longer a licensee in respect

15

of any licensed area wholly or partly included

in the field, but who—

(i)   

was such a licensee at any time in any

chargeable period preceding the

relevant chargeable period, and

20

(ii)   

ceased to be such a licensee because of

a cessation event; and”,

(c)   

in paragraph (b), after “field” insert “(and who does not fall within

paragraph (aa) of this definition)”,

(d)   

in paragraph (c), after “paragraph” insert “(aa) or”, and

25

(e)   

omit the words after paragraph (g).

      (3)  

After that subsection insert—

“(1A)   

In the definition of “participator” in subsection (1)—

(a)   

“cessation event”, in relation to an oil field to which a licence

relates, means any of the following—

30

(i)   

determination of the licence by the licensee,

(ii)   

revocation of the licence by the Secretary of State or a

Northern Ireland Department,

(iii)   

expiry of the licence at the end of its term,

(iv)   

the licensed area ceasing to include any relevant area

35

whatsoever, by reason of the licensee surrendering

the licence so far as it relates to the whole of the

relevant area, and

(v)   

the licence ceasing to apply to the oil field by reason

of the operation of the licence;

40

 
 

Finance Bill
Schedule 42 — PRT: former licensees and former oil fields
Part 2 — Areas treated as continuing to be oil fields

326

 

   

and for the purposes of sub-paragraph (iv) “relevant area”

means an area which is, or combination of areas each of

which is, included in the oil field (whether or not such an area

falls partly outside the oil field);

(b)   

“current participator”, “former participator” and “default

5

payment” have the same meanings as in paragraph 2A of

Schedule 5.”

3          

In Schedule 5 (allowance of expenditure other than abortive exploration

expenditure), in paragraph 2C(2)—

(a)   

in the definition of “current participator”, after paragraph “(a),”

10

insert “(aa),”, and

(b)   

in paragraph (b) of the definition of “former participator”, after

“paragraph (a),” insert “(aa),”.

4          

The amendments made by this Part have effect in relation to persons who

cease to be licensees because of cessation events occurring in chargeable

15

periods that begin after 30 June 2009.

Part 2

Areas treated as continuing to be oil fields

5          

OTA 1975 is amended as follows.

6          

In section 12(1) (interpretation of Part 1), in the definition of “oil field”, after

20

“this Act” insert “(which also includes provision about areas that are to be

treated as continuing to be oil fields)”.

7     (1)  

Schedule 1 (determination of oil fields) is amended as follows.

      (2)  

Before paragraph 1 insert—

“Areas that are oil fields”

25

      (3)  

After paragraph 5 insert—

“Areas treated as continuing to be oil fields

6     (1)  

This paragraph applies if an area has ceased to be—

(a)   

an oil field within the meaning of paragraph 1(1), or

(b)   

part of such an oil field.

30

      (2)  

The area is to be treated as continuing to be—

(a)   

the oil field, or

(b)   

the part of the oil field,

           

that it actually was.

      (3)  

Accordingly, whilst the area is treated in accordance with sub-

35

paragraph (2), any reference to an oil field is to include a reference

to the area.

      (4)  

Sub-paragraph (2) ceases to apply to the area—

(a)   

in accordance with sub-paragraph (5), and

 
 

Finance Bill
Schedule 42 — PRT: former licensees and former oil fields
Part 2 — Areas treated as continuing to be oil fields

327

 

(b)   

if or to the extent that it has not ceased to apply in

accordance with sub-paragraph (5), in accordance with

sub-paragraph (6).

      (5)  

Sub-paragraph (2) ceases to apply to the area if, or to the extent

that, it again becomes—

5

(a)   

an oil field within the meaning of paragraph 1(1), or

(b)   

part of such an oil field.

      (6)  

Sub-paragraph (2) ceases to apply to the area at the end of the

second chargeable period that falls after the chargeable period in

which the area is decommissioned.

10

7     (1)  

A relevant area is decommissioned for the purposes of paragraph

6 if all qualifying assets of the relevant area are decommissioned.

      (2)  

If, and to the extent that, a UK offshore decommissioning regime

applies to qualifying assets of the relevant area, those assets are

decommissioned if—

15

(a)   

the Secretary of State has approved one or more

abandonment programmes under the regime in relation to

those assets, and

(b)   

those programmes have been carried out to the satisfaction

of the Secretary of State.

20

      (3)  

If, and to the extent that, a UK offshore decommissioning regime

does not apply to qualifying assets of the relevant area, those

assets are decommissioned if the Board are satisfied that they have

been decommissioned.

      (4)  

For the purposes of sub-paragraph (3), the Board must have

25

regard to any obligations to decommission the qualifying assets

which arise under the law applicable to the relevant area (whether

the law of any part of the United Kingdom or of any other state or

territory), including any obligations imposed by an authority

having functions under that law in respect of such

30

decommissioning.

      (5)  

If sub-paragraph (3) applies (to any extent) to any qualifying

assets, the Board must give the responsible person notice of any

decision the Board make under that sub-paragraph.

      (6)  

The responsible person may appeal against such a decision by

35

notice in writing given to the Board within three months of the

responsible person receiving the notice under sub-paragraph (5).

      (7)  

An appeal under sub-paragraph (6) may, before it is notified to the

tribunal, be abandoned by notice in writing given to the Board by

the responsible person.

40

      (8)  

The provisions of paragraphs 14A to 14I of Schedule 2 apply to

appeals under sub-paragraph (6) subject to any necessary

modifications.

      (9)  

In this paragraph—

“qualifying assets” means assets that are qualifying assets

45

within the meaning of OTA 1983;

 
 

Finance Bill
Schedule 43 — PRT: abolition of provisional expenditure allowance

328

 

“relevant area” means an area that is treated as being an oil

field, or part of an oil field, under paragraph 6;

“UK offshore decommissioning regime” means—

(a)   

Part 4 of the Petroleum Act 1998, and

(b)   

Part 1 of the Petroleum Act 1987.”

5

8          

The amendments made by this Part have effect in relation to areas that cease

to be oil fields, or parts of oil fields, in chargeable periods that begin after 30

June 2009.

Schedule 43

Section 88

 

PRT: abolition of provisional expenditure allowance

10

Interpretation

1          

In this Schedule—

“future chargeable period” means a chargeable period beginning after

30 June 2009;

“provisional expenditure allowance” means an amount calculated

15

under section 2(9)(a) of OTA 1975.

Abolition of allowance

2          

No provisional expenditure allowance is to be calculated in respect of a

future chargeable period.

Amendments consequential on abolition

20

3     (1)  

Section 2 of OTA 1975 (assessable profits and allowable losses) is amended

as follows.

      (2)  

For subsection (8) substitute—

“(8)   

The amount (if any) to be debited or credited to the participator for

the period in respect of expenditure is the sum of the amounts

25

mentioned in subsection (9) below.”

      (3)  

Omit subsections (9)(a), (10) and (11).

      (4)  

In Schedule 17 to FA 1980 (transfers of interests in oil fields), omit paragraph

11 (and the heading before it).

      (5)  

This paragraph has effect in relation to future chargeable periods.

30

      (6)  

But this paragraph is subject to paragraph 4.

Savings

4     (1)  

This paragraph applies if provisional expenditure allowance has been

calculated in respect of a pre-abolition chargeable period (“the relevant

allowance”).

35

 
 

Finance Bill
Schedule 44 — Supplementary charge: reduction for certain new oil fields
Part 2 — Pool of field allowances

329

 

      (2)  

The saved provisions continue to have effect in future chargeable periods in

relation to the relevant allowance and the relevant participator as if those

provisions had not been amended by paragraph 3.

      (3)  

In this paragraph—

“pre-abolition chargeable period” means a chargeable period that

5

begins before 30 June 2009;

“relevant participator” means the participator in respect of which the

relevant allowance has been calculated;

“the saved provisions” means—

(a)   

section 2(8) and (10) of OTA 1975, and

10

(b)   

paragraph 11 of Schedule 17 to FA 1980.

Schedule 44

Section 89

 

Supplementary charge: reduction for certain new oil fields

Part 1

Reduction of adjusted ring fence profits

15

1     (1)  

A company’s adjusted ring fence profits for an accounting period are to be

reduced by the amount of the company’s pool of field allowances for that

accounting period (see Part 2).

      (2)  

But, if the profits are less than the amount of the pool, the profits are to be

reduced to nil.

20

Part 2

Pool of field allowances

Company’s pool of field allowances

2          

A company’s pool of field allowances for an accounting period (“the

relevant accounting period”) is—

                  P + R
                         

25

           

where—

P is the amount of the company’s pool of field allowances for the

previous accounting period that has been carried into the relevant

accounting period (see paragraphs 3 and 4), and

R is the aggregate of the amounts of field allowances for new oil fields

30

which the company holds (see Part 3) that are activated in respect

of—

(a)   

the relevant accounting period (see Part 4), and

(b)   

reference periods that fall within the relevant accounting

period (see Part 5).

35

Carrying part of pool of field allowances into following period

3     (1)  

This paragraph applies if—

 
 

Finance Bill
Schedule 44 — Supplementary charge: reduction for certain new oil fields
Part 3 — Field allowance: when held and unactivated amount

330

 

(a)   

a company has a pool of field allowances for an accounting period

(“accounting period 1”), and

(b)   

the company’s adjusted ring fence profits for accounting period 1 are

reduced to nil in accordance with paragraph 1(2).

      (2)  

A part of the company’s pool of field allowances for accounting period 1 is

5

to be carried into the following accounting period (“accounting period 2”).

        

(3)  The part to be carried into accounting period 2 is—

                  F - P
                         

           

where—

F is the amount of the company’s pool of field allowances for

accounting period 1, and

10

P is the amount of the adjusted ring fence profits for accounting period

1.

Carrying whole of pool of field allowances into following period

4     (1)  

This paragraph applies if a company—

(a)   

has a pool of field allowances for an accounting period, but

15

(b)   

has no adjusted ring fence profits for the accounting period.

      (2)  

The whole of the company’s pool of field allowances for the accounting

period is to be carried into the following accounting period.

Part 3

Field allowance: when held and unactivated amount

20

Initial licensee to hold a field allowance

5     (1)  

A company that is an initial licensee in a new oil field is to hold a field

allowance for that field as from the beginning of the authorisation day.

      (2)  

The amount of the field allowance which the licensee is to hold at that time

is—

                  T - S
                         

25

           

where—

T is the amount of the total field allowance for the field (see paragraph

24);

S is the share of the equity in the field which the initial licensee has at

the beginning of the authorisation day.

30

Holding a field allowance on acquisition of equity share

6          

For provision about holding a field allowance by virtue of the acquisition of

a share of the equity in a new oil field, see paragraph 15(2).

Unactivated amount of a field allowance

7     (1)  

This paragraph applies if a company holds a field allowance for a new oil

35

field by virtue of paragraph 5 or 15(2).

 
 

 
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