Finance Bill

House of Commons

Session 2008 - 09
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Other Bills before Parliament

Finance Bill

Finance Bill
Schedule 39 — PRT: blended oil
325

“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
15
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
20
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
35
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
40
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
326

(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)”.
5
      (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
15
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
327

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-consideration swap” means a case where conditions A,
B, C and D are met;
“mixed-consideration swap” means a case where conditions A,
10
B, C and E are met.
(3)
Condition A is that a company (“company A”) disposes of one or
more UK licences to another company (“company B”), by way of a
bargain at arm’s length (“disposal A”).
(4)
Condition B is that company B disposes of one or more UK licences
15
to company A, by way of a bargain at arm’s length (“disposal B”).
(5)
Condition C is that either or both of the following paragraphs
applies—
(a)
the licence, or at least one of the licences, comprised in
disposal A relates to a developed area;
20
(b)
the licence, or at least one of the licences, comprised in
disposal B relates to a developed area.
(6)
Condition D is that both—
(a)
disposal A is the only consideration given for disposal B, and
(b)
disposal B is the only consideration given for disposal A.
25
(7)
Condition E is that either—
(a)
disposal A is the only consideration given for disposal B, or
(b)
disposal B is the only consideration given for disposal A,

(and accordingly one of the disposals is part of the consideration
given for the other disposal).
30
(8)
In this section and sections 195B to 196 a reference to disposal of a UK
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.
35
195B
Licence-consideration swap
(1)
This section applies to a licence-consideration swap.
(2)
Each company participating in the swap is to be treated as follows.
(3)
As regards the licence, or each licence, which the company disposes
of, the company is to be treated as if it had disposed of that licence
40
for a consideration of such amount as to secure that on the disposal
neither a gain nor a loss accrues to the company.

Finance Bill
Schedule 40 — Oil: chargeable gains
Part 1 — Licence swaps
328

(4)
In a case where the company acquires only one licence, the company
is to be treated as if it had acquired the licence for a consideration of
the same amount as the deemed disposal consideration.
(5)
In a case where the company acquires two or more licences, as
regards each licence acquired, the company is to be treated as if it
5
had acquired that licence for a consideration of—

where—
DDC is the deemed disposal consideration;
A is the value of the licence acquired;
TA is total value of all the licences acquired.
10
(6)
In this section “deemed disposal consideration”, in relation to a
company participating in the swap, means—
(a)
the amount of the consideration for which the company is,
under subsection (3), treated as having disposed of its licence
(if the company disposes of only one licence), or
15
(b)
the aggregate of all such amounts (if the company disposes of
two or more licences).
195C
Company that receives mixed consideration: N exceeds C
(1)
This section applies to a mixed-consideration swap if—
(a)
the no gain/no loss loss amount (“N”) of the company that
20
receives the mixed consideraion (“company R”), exceeds
(b)
the amount of non-licence consideration (“C”) which
company R receives.
(2)
In a case where company R acquires only one licence, company R is
to be treated as if it had acquired the licence for a consideration of—
25
(3)
In a case where company R acquires two or more licences, as regards
each licence acquired, company R is to be treated as if it had acquired
the licence for a consideration of—

where—
A is the value of the licence acquired;
30
TA is total value of all the licences acquired.
(4)
The disposal by company R of a licence under the swap 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.
35
(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 a licence under the swap (“company G”)
subsequently disposes of the licence, company R’s acquisition of the
licence is to be treated as company G’s acquisition of it.
40

Finance Bill
Schedule 40 — Oil: chargeable gains
Part 1 — Licence swaps
329

(7)
In this section the reference to the no gain/no loss amount of
company R is a reference to—
(a)
in a case where company R disposes of only one licence,
company R’s no gain/no loss amount in relation to that
disposal, or
5
(b)
in a case where company R disposes of two or more licences,
the aggregate of company R’s no gain/no loss amounts in
relation to all of those disposals.
195D
Company that receives mixed consideration: N does not exceed C
(1)
This section applies to a mixed-consideration swap if—
10
(a)
the no gain/no loss amount (“N”) of the company that
receives the mixed consideration (“company R”) does not
exceed
(b)
the amount of non-licence consideration (“C”) which
company R receives.
15
(2)
As regards the licence, or each licence, which company R acquires,
company R is to be treated as if it had acquired the licence for nil
consideration.
(3)
In a case where company R disposes of only one licence, company R
is to be treated as if, on the disposal of the licence, there had arisen a
20
gain of—
(4)
In a case where company R disposes of two or more licences, as
regards each licence disposed of, company R is to be treated as if, on
the disposal of the licence, there had arisen a gain of—

where—
25
D is the value of the licence disposed of;
TD is total value of all the licences disposed of.
195E
Company that gives mixed consideration
(1)
This section applies to a mixed-consideration swap—
(a)
whatever the no gain/no loss amount (“N”) of the company
30
that gives the mixed consideration (“company G”), and
(b)
whatever the amount of the non-licence consideration (“C”)
which company G gives.
(2)
In a case where company G acquires only one licence, company G is
to be treated as if it had acquired the licence for a consideration of—
35
(3)
In a case where company G acquires two or more licences, as regards
each licence acquired, company G is to be treated as if it had acquired
the licence for a consideration of—

where—
A is the value of the licence acquired;
40

Finance Bill
Schedule 40 — Oil: chargeable gains
Part 1 — Licence swaps
330

TA is total value of all the licences acquired.
(4)
The disposal by company G of a licence under the swap 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.
5
(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 a licence under the swap (“company R”)
subsequently disposes of the licence, company G’s acquisition of the
licence is to be treated as company R’s acquisition of it.
10
(7)
In this section the reference to the no gain/no loss amount of
company G is a reference to—
(a)
in a case where company G disposes of only one licence,
company G’s no gain/no loss amount in relation to that
disposal, or
15
(b)
in a case where company G disposes of two or more licences,
the aggregate of company G’s no gain/no loss amounts in
relation to all of those disposals.
6     (1)
Section 196 (interpretation of sections 194 and 195) is amended as follows.
      (2)
In the heading, for “and 195” substitute “to 195E”.
20
      (3)
In subsection (1), after “section 194” insert “and this section”.
      (4)
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
      (5)
In subsection (2), for “and (1A)” substitute “to (1B)”.
      (6)
In subsection (3), after “(1)” insert “or (1B)”.
      (7)
In subsection (5)—
(a)
for “and 195” substitute “to 195E”,
(b)
after the definition of “licence” insert—
30
““licence-consideration 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;
“non-licence consideration” means consideration that
does not consist of disposal of a UK licence, as
determined at the time the swap arrangements are
entered into;
45

Finance Bill
Schedule 40 — Oil: chargeable gains
Part 2 — Reinvestment of ring fence assets
331

“swap arrangements”, in relation to a licence-
consideration swap or a mixed-consideration swap,
means the arrangements under which the swap takes
place;”.
      (8)
After subsection (5A) insert—
5
“(5B)
In any of sections 195B to 195E, a reference to the value of a licence
comprised in disposal A or disposal B (see section 195A) is a
reference to the value of the licence as determined under the swap
arrangements at the time the swap arrangements are entered into.”
7
In Schedule 3 (assets held on 31 March 1982), in paragraph 1(2) (meaning of
10
no gain/no loss disposal), after “provisions” insert “or any of sections 195B,
195C or 195E”.
8
The amendments made by this Part have effect in relation to disposals made
on or after 22 April 2009.
Part 2
15
Reinvestment of ring fence assets
Amendment of TCGA 1992
9
TCGA 1992 is amended as follows.
Roll-over relief
10
In section 198 (replacement of business assets used in connection with oil
20
fields), for subsection (3) substitute—
“(3)
Where—
(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
25
that section is a depreciating asset,

section 154(2)(b) is to have effect as if the reference to a trade carried
on by the claimant were a reference solely to the claimant’s ring fence
trade.”
Alternative to roll-over relief
30
11
In section 198 (replacement of business assets used in connection with oil
fields), after subsection (2) insert—
“(2A)
But subsection (1) is subject to section 198A(3)(a).”
12
After that section insert—
“198A
  Ring fence reinvestment: whole consideration reinvested
35
(1)
This section applies if a person (“P”) makes a disposal and
acquisition which—
(a)
is a ring fence reinvestment, and
(b)
qualifies for roll-over relief.