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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—equation: cross[times[char[D],char[D],char[C]],over[char[A],times[char[T],char[A]]]]

   

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—equation: plus[(*n*)char[N],minus[char[C]]]

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—equation: cross[id[plus[char[N],minus[char[C]]]],over[char[A],times[char[T],char[A]]]]

   

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—equation: plus[(*n*)char[C],minus[char[N]]]

(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—equation: cross[id[plus[char[C],minus[char[N]]]],over[char[D],times[char[T],char[D]]]]

   

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—equation: plus[char[N],char[C]]

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—equation: cross[id[plus[char[N],char[C]]],over[char[A],times[char[T],char[A]]]]

   

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.

 
 

 
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