Finance Bill

House of Commons

Session 2008 - 09
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Finance Bill

Finance Bill
Schedule 41 — Oil assets put to other uses
Part 1 — Petroleum revenue tax
336

Schedule 41
Section 86

Oil assets put to other uses
Part 1
Petroleum revenue tax
Allowance of decommissioning and restoration expenditure
5
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”.
10
      (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
15
(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.
20
(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
(b)
use for any other purpose (apart from a purpose falling
25
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
a taxable field or other oil field includes use giving rise to receipts
30
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
amended as follows.
35
      (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
or partly for an oil purpose,”.
40

Finance Bill
Schedule 41 — Oil assets put to other uses
Part 1 — Petroleum revenue tax
337

      (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
(b)
use for any other purpose (apart from a purpose falling
5
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
includes use giving rise to receipts which, for the purposes of this
10
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.
      (2)
In sub-paragraph (1)(a) and (b), for “in connection with a taxable field”
15
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—
(a)
use in connection with a taxable field, and
20
(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.
25
     (2B)
In this Act a reference to use of an asset for an ineligible oil
purpose is a reference to—
(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
30
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.
     (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
35
receipts which, for the purposes of this Act, are tariff receipts.”
Commencement
4
The amendments made by this Part have effect in relation to chargeable
periods beginning after 30 June 2009.

Finance Bill
Schedule 42 — PRT: former licensees and former oil fields
Part 1 — Persons who cease to be licensees because of cessation events
338

Part 2
Capital allowances
General decommissioning expenditure
5     (1)
Section 163 of CAA 2001 (meaning of “general decommissioning
expenditure”) is amended as follows.
5
      (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
(b)
has, at any time since it was brought into use, not been used
wholly for qualifying purposes.”
10
      (4)
In subsection (4ZC), for “the purposes of the ring fence trade” substitute
“qualifying purposes”.
      (5)
After subsection (4C) insert—
“(4D)
In this section a reference to use for qualifying purposes is a reference
to—
15
(a)
use for the purposes of any ring fence trade of any person, or
(b)
other use in—
(i)
the United Kingdom,
(ii)
the territorial sea of the United Kingdom, or
(iii)
an area designated under section 1(7) of the
20
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
Act 1975).”
6
In section 165(4A) of CAA 2001 (general decommissioning expenditure after
25
ceasing ring fence trade), for “abandonment expenditure” substitute
“general decommissioning expenditure”.
Commencement
7     (1)
The amendments made by paragraph 5 have effect in relation to expenditure
incurred on or after 22 April 2009.
30
      (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.
Schedule 42
Section 87

PRT: former licensees and former oil fields
Part 1
35
Persons who cease to be licensees because of cessation events
1
OTA 1975 is amended as follows.

Finance Bill
Schedule 42 — PRT: former licensees and former oil fields
Part 1 — Persons who cease to be licensees because of cessation events
339

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 paragraph (a) insert—
“(aa)
a person who is no longer a licensee in respect
5
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
10
(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
15
(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—
20
(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
25
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;
30

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
35
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),”
40
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
45
periods that begin after 30 June 2009.

Finance Bill
Schedule 42 — PRT: former licensees and former oil fields
Part 2 — Areas treated as continuing to be oil fields
340

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
“this Act” insert “(which also includes provision about areas that are to be
5
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”
      (3)
After paragraph 5 insert—
10
“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.
      (2)
The area is to be treated as continuing to be—
15
(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-
paragraph (2), any reference to an oil field is to include a reference
20
to the area.
      (4)
Sub-paragraph (2) ceases to apply to the area—
(a)
in accordance with sub-paragraph (5), and
(b)
if or to the extent that it has not ceased to apply in
accordance with sub-paragraph (5), in accordance with
25
sub-paragraph (6).
      (5)
Sub-paragraph (2) ceases to apply to the area if, or to the extent
that, it again becomes—
(a)
an oil field within the meaning of paragraph 1(1), or
(b)
part of such an oil field.
30
      (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.
7     (1)
A relevant area is decommissioned for the purposes of paragraph
6 if all qualifying assets of the relevant area are decommissioned.
35
      (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—
(a)
the Secretary of State has approved one or more
abandonment programmes under the regime in relation to
40
those assets, and

Finance Bill
Schedule 43 — PRT: abolition of provisional expenditure allowance
341

(b)
those programmes have been carried out to the satisfaction
of the Secretary of State.
      (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
5
been decommissioned.
      (4)
For the purposes of sub-paragraph (3), the Board must have
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
10
territory), including any obligations imposed by an authority
having functions under that law in respect of such
decommissioning.
      (5)
If sub-paragraph (3) applies (to any extent) to any qualifying
assets, the Board must give the responsible person notice of any
15
decision the Board make under that sub-paragraph.
      (6)
The responsible person may appeal against such a decision by
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
20
tribunal, be abandoned by notice in writing given to the Board by
the responsible person.
      (8)
The provisions of paragraphs 14A to 14I of Schedule 2 apply to
appeals under sub-paragraph (6) subject to any necessary
modifications.
25
      (9)
In this paragraph—
“qualifying assets” means assets that are qualifying assets
within the meaning of OTA 1983;
“relevant area” means an area that is treated as being an oil
field, or part of an oil field, under paragraph 6;
30
“UK offshore decommissioning regime” means—
(a)
Part 4 of the Petroleum Act 1998, and
(b)
Part 1 of the Petroleum Act 1987.”
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
35
June 2009.
Schedule 43
Section 88

PRT: abolition of provisional expenditure allowance
Interpretation
1
In this Schedule—
40
“future chargeable period” means a chargeable period beginning after
30 June 2009;

Finance Bill
Schedule 43 — PRT: abolition of provisional expenditure allowance
342

“provisional expenditure allowance” means an amount calculated
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.
5
Amendments consequential on abolition
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
10
the period in respect of expenditure is the sum of the amounts
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).
15
      (5)
This paragraph has effect in relation to future chargeable periods.
      (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
20
allowance”).
      (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—
25
“pre-abolition chargeable period” means a chargeable period that
begins before 30 June 2009;
“relevant participator” means the participator in respect of which the
relevant allowance has been calculated;
“the saved provisions” means—
30
(a)
section 2(8) and (10) of OTA 1975, and
(b)
paragraph 11 of Schedule 17 to FA 1980.