Oil Taxation Act 1983

1983 CHAPTER 56

Contents

Go to Preamble

1. Reliefs for expenditure

   1. 1. Expenditure incurred on non-dedicated mobile assets

   2. 2. Dedicated mobile assets

   3. 3. Expenditure incurred on long-term assets other than non-dedicated mobile assets

   4. 4. Expenditure related to exempt gas and deballasting

   5. 5. Miscellaneous amendments relating to reliefs

2. Charge of receipts

   1. 6. Chargeable tariff receipts

   2. 7. Chargeable receipts from disposals

   3. 8. Qualifying assets

   4. 9. Tariff receipts allowance

   5. 10. Returns relating to tariff and disposal receipts

   6. 11.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

   7. 12. Charge of receipts attributable to U.K. use of foreign field asset

3. Supplementary

   1. 13. Transitional provisions

   2. 14. Re-opening of decisions for periods before the passing of this Act

   3. 15. Short title, interpretation, construction and repeals

4. SCHEDULE 1

   Allowable Expenditure

5. SCHEDULE 2

   Supplemental Provisions as to Receipts from Qualifying Assets

6. SCHEDULE 3

   Tariff Receipts Allowance

7. SCHEDULE 4

   Receipts Attributable to United Kingdom Use of Foreign Field Assets

8. SCHEDULE 5

   Transitional Provisions

9. SCHEDULE 6

   Repeals

An Act to vary the reliefs available for certain expenditure incurred in connection with assets used or to be used in connection with oil fields; to bring into charge to petroleum revenue tax certain sums received or receivable in respect of such assets and of certain other assets situated in the United Kingdom, the territorial sea thereof or a designated area, within the meaning of the Continental Shelf Act 1964; to amend Part II of the Oil Taxation Act 1975 in relation to sums so received or receivable; and for connected purposes.

[1st December 1983]

X1Most Gracious Sovereign,WE, Your Majesty’s most dutiful and loyal subjects, the Commons of the United Kingdom in Parliament assembled, towards raising the necessary supplies to defray Your Majesty’s public expenses, and making an addition to the public revenue, have freely and voluntarily resolved to make the provision hereinafter mentioned; and do therefore most humbly beseech Your Majesty that it may be enacted, and be it enacted by the Queen’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—

Reliefs for expenditure

1 Expenditure incurred on non-dedicated mobile assets

(1)Subject to subsection (3) below, with respect to expenditure which is or was incurred after 30th June 1982 in acquiring, bringing into existence or enhancing the value of an asset, section 4 of the principal Act (allowance of expenditure on long-term assets) shall apply only where—

(a)the asset is a mobile asset which is not dedicated to the oil field referred to in subsection (1) of that section; or

(b)the expenditure is incurred as mentioned in section 13(1)(b) below.

(2)Where section 4 of the principal Act applies as mentioned in subsection (1)(a) above, it shall so apply with the following modifications:—

(a)in subsection (1), after the words “subsection (13) below” there shall be inserted the words “and section 1 of the Oil Taxation Act 1983” and for the words from “whose useful life” to “used” there shall be substituted the words “which, at the end of the first relevant claim period, is or is expected to be a long-term asset as defined in section 3(8) of the Oil Taxation Act 1983”;

(b)subsections (3) and (4) shall be omitted;

(c)in subsection (5), paragraph (a) and the words “in any other case” in paragraph (b) shall be omitted and, in paragraph (b), for the words “that connection” there shall be substituted the words “connection with the field”;

(d)subsection (6) shall be omitted;

(e)in subsection (7), for the words from the beginning to “each subsequent claim period” there shall be substituted the words “For each claim period subsequent to the first relevant claim period and” and for the words “subsections (5) and (6)” there shall be substituted the words “subsection (5)”; and

(f)in subsection (11) for the words from “subsections (5)” to “they apply” there shall be substituted the words “subsection (5) above (including that subsection as it applies”.

(3)If the asset referred to in subsection (1)(a) above becomes dedicated to the oil field referred to in subsection (1) of section 4 of the principal Act or is or becomes dedicated to another oil field,—

(a)expenditure incurred as mentioned in subsection (1) above shall not be allowable under section 4 of the principal Act for a claim period for which it is allowable under section 3 below nor, subject to paragraph (b) below, for a claim period which falls wholly or partly within a claim period of another field to which the asset is or becomes dedicated, being a claim period for which the expenditure is allowable; and

(b)where expenditure incurred in relation to the asset becomes allowable under section 3 below, no part of that expenditure shall be allowable under section 4 of the principal Act for any claim period ending less than six months before the end of a claim period for which the expenditure is allowable under section 3 below.

(4)Paragraph 4 of Schedule 4 to the principal Act (reduction of allowable expenditure on disposal of long-term asset formerly used in connection with an oil field) does not apply to any disposal of an asset after 30th June 1982 unless the asset is a mobile asset which is not dedicated to the oil field referred to in section 4(1) of the principal Act.

2 Dedicated mobile assets

(1)For the purposes of this Act and Part I of the principal Act a mobile asset becomes dedicated to a particular oil field in a claim period if—

(a)the asset is used in connection with that field during the whole or part of that claim period; and

(b)the asset was not, at the beginning of that period, already dedicated to that field; and

(c)at the end of that period it is reasonable to make the assumptions in subsection (2) below.

(2)The assumptions referred to in paragraph (c) of subsection (1) above are—

(a)that during the whole or substantially the whole of the relevant period, the asset will be used in connection with the field referred to in that subsection (whether or not that use will be exclusive to that field); and

(b)that the main use of the asset during the whole of the relevant period will be in connection with that field or with two or more oil fields of which that field is one.

(3)In any case where—

(a)at or before the time when he is a participator in an oil field, a person incurs expenditure in bringing into existence a mobile asset, and

(b)that expenditure is so incurred in a claim period for that field which is earlier than that in which the asset is first used by that person in connection with that field, and

(c)at the end of that claim period, it is reasonable to make the assumptions in subsection (2) above, and

(d)the circumstances are such that the asset is not a brought-in asset, as defined in section 4(12)(a) of the principal Act,

then, as respects any claim for the allowance of the expenditure referred to in paragraph (a) above which is made before the asset is first used as mentioned in paragraph (b) above, the asset shall be regarded for the purposes of this Act and Part I of the principal Act as becoming dedicated to the oil field in question in the claim period referred to in paragraphs (b) and (c) above.

(4)In subsection (2) above “the relevant period” means the period beginning at the end of the claim period referred to in subsection (1) above or, where subsection (3) above applies, at the end of the claim period in which it can reasonably be expected that the asset will be first used, and ending—

(a)at the end of the useful life of the asset, or

(b)when the winning of oil from the field in question permanently ceases,

whichever first occurs.

(5)If, in the case of a mobile asset which would not be dedicated to a particular oil field but for the provisions of subsection (3) above, it becomes apparent at any time that it is no longer reasonable to make the assumptions in subsection (2) above, then the asset concerned shall be regarded for the purposes of this Act and Part I of the principal Act as never having been dedicated to that field; and the provisions of paragraph 9 of Schedule 5 to the principal Act (variations of decisions on claims for allowable expenditure) shall have effect accordingly.

3 Expenditure incurred on long-term assets other than non-dedicated mobile assets

(1)Subject to section 13 below, this section applies to expenditure (whether or not of a capital nature) which is or was incurred by a person after 30th June 1982 and at or before the time when he is or was a participator in an oil field, being expenditure incurred, subject to subsection (2) below, in acquiring, bringing into existence, or enhancing the value of an asset—

(a)which, at the end of the relevant claim period, is being or is expected to be used in connection with the field; and

(b)which, at the end of the relevant claim period, is or is expected to be a long-term asset; and

(c)which either is not a mobile asset or is a mobile asset which became dedicated to that field in the relevant claim period or in any earlier claim period.

(2)This section does not apply to expenditure incurred as mentioned in subsection (1) above in any case where the Board consider that its application to that expenditure would have only a negligible effect on the total expenditure allowable under Part I of the principal Act for the field and so notify the responsible person.

(3)Part I of Schedule 1 to this Act shall have effect for the purpose of allowing relief for certain expenditure which would not otherwise fall within this section or, as the case may be, section 3 of the principal Act.

(4)Except as provided by subsections (6) and (7) and section 4 below and Part II of Schedule 1 to this Act, the whole of any expenditure to which this section applies shall be allowable on a claim under Schedule 5 or Schedule 6 to the principal Act for the relevant claim period.

(5)The relevant claim period referred to in subsections (1) and (4) above is—

(a)the claim period which is appropriate under paragraph 2 of Schedule 5 or, as the case may be, paragraph 1 of Schedule 6 to the principal Act; or

(b)if the asset is a brought-in asset, as defined in section 4(12)(a) of the principal Act, and the expenditure has not already been allowable for an earlier claim period by virtue of paragraph (a) above, the claim period in which the asset is first used in connection with the field in question, discounting, in the case of a mobile asset, any claim period in which it was not dedicated to that field; or

(c)if the asset is a mobile asset and paragraph (b) above does not apply and the expenditure has not already been allowable for an earlier claim period by virtue of paragraph (a) above, the claim period in which the asset became dedicated to the field in question.

(6)Subsections (3) to (5A) of section 3 of the principal Act apply for the purposes of this section and Schedule 1 to this Act as they apply for the purposes of that section; and, except in so far as section 5 below provides to the contrary, any reference to section 4 of the principal Act (but not a reference to any specific provision of that section) in—

(a)Part I of that Act,

(b)any enactment, other than this Act, which is to be construed as one with that Part, or

(c)section 107 of the M1Finance Act 1980 (transmedian fields), shall be construed as including a reference to this section, section 4 below and Schedule 1 to this Act.

(7)Section 4(13) of the principal Act (interests in assets) applies to the preceding provisions of this section and the provisions of Schedule 1 to this Act; and those provisions are subject to paragraph 2 of Schedule 4 and to Schedules 5 and 6 to the principal Act.

(8)In this section “long-term asset” means an asset the useful life of which continues after the end of the claim period in which it is first used in connection with the oil field in question.

4 Expenditure related to exempt gas and deballasting

(1)In any case where expenditure falls within section 3(1) above, but by reason of section 10(2) of the principal Act (exempt gas) some of the use (or expected use) of the asset is not use in connection with an oil field, such part of that expenditure as it is just and reasonable to apportion to that use (or expected use) shall be excluded from the expenditure which is allowable as mentioned in section 3(4) above.

(2)In any case where expenditure—

(a)falls within section 3(1) above, or

(b)by virtue of any provision of Part I of Schedule 1 to this Act, falls within section 3 of the principal Act,

but some of the use (or expected use) of the asset is use for deballasting, such part of that expenditure as it is just and reasonable to apportion to that use (or expected use) shall be excluded from the expenditure which is allowable as mentioned in section 3(4) above or, as the case may be, from the expenditure which is allowable under section 3 of the principal Act.

(3)In any case where—

(a)expenditure does not fall within section 3(1) above or section 3 of the principal Act by reason only of section 10(2) of that Act (exempt gas), but

(b)the asset in relation to which the expenditure was incurred is or is expected to be used in a way which gives rise to tariff receipts,

then, so far as relates to so much of that expenditure as it is just and reasonable to apportion to the use referred to in paragraph (b) above, that use of the asset shall be treated for the purposes of section 3 above, Schedule 1 to this Act and section 3 of the principal Act as use in connection with the field from which the excluded oil, within the meaning of section 10 of that Act, is won.

(4)References in subsection (3) above to the use of an asset (other than the final reference to use in connection with a field) include references to the provision, in connection with the use of the asset, of services or other business facilities of any kind.

(5)In any case where—

(a)expenditure is incurred in enhancing the value of an asset with a view to the subsequent disposal of it or of an interest in it, and

(b)by reason only of section 10(2) of the principal Act (exempt gas), the expenditure does not fall within section 3(1) above or section 3 of that Act, and

(c)the subsequent disposal of, or of an interest in, the asset gives or is expected to give rise to disposal receipts,

then, such part of the use of the asset as it is just and reasonable to apportion to the expenditure referred to in paragraph (a) above shall be treated for the purposes of section 3 above, Schedule 1 to this Act and section 3 of the principal Act as use in connection with the field from which the excluded oil, within the meaning of section 10 of that Act, is won.

5 Miscellaneous amendments relating to reliefs

(1)In section 3 of the principal Act (allowance of expenditure otherwise than on long-term assets etc.)—

(a)in subsection (1) after the words “to the extent” and in subsection (6) after the word “shall” there shall in each case be inserted the words “subject to subsection (7) below”; and

(b)at the beginning of subsection (5) there shall be inserted the words “Subject to subsection (5A) below”.

(2)After subsection (5) of that section there shall be inserted the following subsection:—

“(5A)Where expenditure incurred in relation to an asset is incurred—

(a)in part for one of the purposes specified in subsection (5) above (or for what would be one of those purposes if section 10(2) below were disregarded), and

(b)in part for the purpose of enabling the asset to be used in a way giving rise to tariff receipts within the meaning of the Oil Taxation Act 1983,

then, to the extent that the expenditure is incurred for the purpose mentioned in paragraph (b) above, it shall be treated for the purposes of this Part of this Act as incurred for one of the purposes specified in subsection (5) above.”

(3)At the end of section 3 of the principal Act there shall be added the following subsections:—

“(7)In any case where—

(a)expenditure which is incurred by any person as mentioned in subsection (6) above is so incurred in connection with a long-term asset, and

(b)the long-term asset gives rise to receipts which, for the purpose of the Oil Taxation Act 1983, are tariff receipts of that person attributable to the field for which any of that expenditure is so allowable,

then, so far as relates to that field, in making in accordance with subsection (6) above any apportionment for the purposes of either or both of subsections (1) and (5) above, the whole of the relevant expenditure shall be apportioned to one or more of the purposes mentioned in that subsection or, as the case may be, those subsections.

(8)In subsection (7) above—

(a)“long-term asset” means an asset whose useful life continues after the end of the claim period for which a claim is first made for an allowance in respect of expenditure incurred in connection with the asset; and

(b)“relevant expenditure” means that portion of the expenditure in connection with the asset which is reasonably attributable to the use of the asset which gives rise to the receipts referred to in subsection (7)(b) above.”

(4)Paragraph 1 of Schedule 4 to the principal Act (expenditure not allowable under section 3 or section 4 of that Act if relief already allowable for another person) does not apply to any expenditure which—

(a)consists of a payment made to a participator or a person connected with him; and

(b)constitutes a tariff receipt or disposal receipt of the participator.

(5)Subsections (1) to (4) above apply with respect to expenditure which is or was incurred after 30th June 1982.

(6)In relation to expenditure incurred in the acquisition of an asset on or after 1st April 1983, paragraph 2 of Schedule 4 to the principal Act shall have effect subject to the following modifications—

(a)in sub-paragraph (1), the words from “by another person” to “that asset” shall be omitted and at the end there shall be added the words “in acquiring, bringing into existence or enhancing the value of that asset”; and

(b)for sub-paragraph (3) of that paragraph there shall be substituted the following sub-paragraph:—

“(3)The preceding provisions of this paragraph have effect (with any necessary modifications) in relation to expenditure incurred by a person in respect of—

(a)the use of an asset, or

(b)the provision of services or other business facilities of whatever kind in connection with the use, otherwise than by that person, of an asset,

as they have effect in relation to expenditure incurred in the acquisition of, or of an interest in, an asset.”

(7)Notwithstanding anything in section 3(6) above, any reference to section 4 of the principal Act in—

(a)paragraph 4 of Schedule 4 to that Act (disposal of certain long-term assets), or

(b)paragraph 2(5) or paragraph 4 of Schedule 5 to that Act (claims and appeals relating to allowance of expenditure),

does not include a reference to sections 3 and 4 above or Schedule 1 to this Act.

(8)Paragraph 5 of Schedule 4 to the principal Act (treatment of payments for hire of assets) shall not apply in any case where the payments are or were received after 30th June 1982 (whenever the expenditure was incurred).

Charge of receipts

6 Chargeable tariff receipts

(1)In computing under section 2 of the principal Act the assessable profit or allowable loss accruing to a participator from an oil field in any chargeable period ending after 30th June 1982, the positive amounts for the purposes of that section (as specified in subsection (3)(a) thereof) shall be taken to include any tariff receipts of the participator attributable to that field for that period.

(2)Subject to the provisions of this section, for the purposes of this Act the tariff receipts of a participator in an oil field which are attributable to that field for any chargeable period are the aggregate of the amount or value of any consideration (whether in the nature of income or capital) received or receivable by him in that period (and after 30th June 1982) in respect of—

(a)the use of a qualifying asset; or

(b)the provision of services or other business facilities of whatever kind in connection with the use, otherwise than by the participator himself, of a qualifying asset.

(3)Any reference in this Act to the asset to which any tariff receipts are referable is a reference to the qualifying asset referred to in paragraph (a) or, as the case may be, paragraph (b) of subsection (2) above.

(4)Notwithstanding anything in subsection (2) above, any amount which—

(a)is, in relation to the person giving it, expenditure in respect of interest or any other pecuniary obligation incurred in obtaining a loan or any other form of credit, or

(b)is referable to the use of an asset for, or the provision of services or facilities in connection with, deballasting,

does not constitute a tariff receipt for the purposes of this Act; and, accordingly, any consideration which includes such an amount shall be apportioned in such manner as is just and reasonable.

(5)Schedule 2 to this Act shall have effect for supplementing the provisions of this section and of sections 7 and 8 below.

7 Chargeable receipts from disposals

(1)In computing under section 2 of the principal Act the assessable profit or allowable loss accruing to a participator from an oil field in any chargeable period ending after 30th June 1982, the positive amounts for the purposes of that section (as specified in subsection (3)(a) thereof) shall be taken to include any disposal receipts of the participator attributable to that field for that period.

(2)Subject to the provisions of this section, for the purposes of this Act the disposal receipts of a participator in an oil field which are attributable to that field for any chargeable period are the aggregate of the amount or value of any consideration received or receivable by him in respect of the disposal in that period of a qualifying asset or of an interest in such an asset.

(3)Where there is such a redetermination as is mentioned in subsection (4) of section 107 of the M1Finance Act 1980 (transmedian fields) and in consequence thereof the participators in the field receive a repayment, credit or set-off in respect of expenditure which was incurred in acquiring, bringing into existence or enhancing the value of a qualifying asset or an interest in it, the repayment shall be regarded as consideration received as mentioned in subsection (2) above in respect of the disposal of an interest in the asset.

(4)No account shall be taken under subsection (2) above of any disposal of, or of an interest in, a qualifying asset which takes place more than two years after the time at which the asset—

(a)ceases to be used in connection with any oil field whatsoever, or

(b)ceases to give rise to tariff receipts of the participator referred to in that subsection,

whichever is the later.

(5)Notwithstanding anything in subsection (2) or subsection (3) above, any amount which, in relation to the person paying it,—

(a)is expenditure in respect of interest or any other pecuniary obligation incurred in obtaining a loan or any other form of credit, or

(b)is a payment made for the purpose of obtaining a direct or indirect interest in oil won or to be won from an oil field,

does not constitute a disposal receipt for the purposes of this Act; and accordingly, any consideration which includes such an amount shall be apportioned in such manner as is just and reasonable.

(6)If in any claim period a qualifying asset gives rise to disposal receipts of a participator and any expenditure incurred by the participator is expenditure which in that period qualifies for supplement under paragraph (b)(ii) or paragraph (c)(ii) of subsection (9) of section 2 of the principal Act, then, except in so far as it is expenditure falling within section 111(7) of the M2Finance Act 1981 (certain expenditure incurred before 1st January 1983),—

(a)the amount which, apart from this subsection, would in his case be taken into account under either or both of those paragraphs shall be reduced by deducting therefrom a fraction thereof determined under subsection (7) below or, if that fraction exceeds unity, shall be taken to be nil; and

(b)references in subsections (2) and (3) of section 9 of the principal Act (limit on amount of tax payable) to expenditure which was not allowed as qualifying for supplement under section 2(9)(b)(ii) or (c)(ii) shall be construed accordingly.

(7)For the claim period referred to in subsection (6) above, the fraction referred to in paragraph (a) of that subsection is that of which—

(a)the numerator, subject to subsection (8) below, is the disposal receipts of the participator in question for that period in respect of the qualifying asset referred to in subsection (6) above or, if it is less, the expenditure allowed or allowable to the participator in respect of that asset under section 3 above or section 4 of the principal Act; and

(b)the denominator is so much of the total amount of expenditure allowable for the field on a claim for the claim period referred to in subsection (6) above as, in the case of the participator in question, falls to be taken into account under paragraphs (b)(i) and (c)(i) of subsection (9) of section 2 of the principal Act;

and in paragraph (b) above “allowable” means allowable under section 3 or section 4 of the principal Act or under section 3 above.

(8)If the disposal receipts in question relate to a disposal of an interest in the asset, rather than the asset itself, then the reference in subsection (7)(a) above to certain expenditure shall be construed as a reference to such proportion only of that expenditure as it is just and reasonable to apportion to the interest disposed of.

8 Qualifying assets

(1)Subject to paragraph 4 of Schedule 2 to this Act, for the purposes of this Act a “qualifying asset”, in relation to a participator in an oil field, means [F1subject to subsection (1A) below] an asset—

(a)which either is not a mobile asset or is a mobile asset dedicated to that oil field; and

(b)in respect of which expenditure incurred by the participator is allowable, or has been allowed, for that field under section 3 above, section 4 of the principal Act or, subject to subsection (2) below, section 3 of that Act.

[F2(1A)Notwithstanding anything in subsection (1) above, the following assets are not qualifying assets for the purposes of this Act, namely,—

(a)land or an interest in land; and

(b)a building or structure which is situated on land and which does not fall within any of sub-paragraphs (i) to (iv) of paragraph (c) of subsection (4) of section 3 of the principal Act.]

(2)If, in respect of any asset, the only expenditure which falls within subsection (1)(b) above is expenditure allowable or allowed under section 3 of the principal Act, the asset shall not be a qualifying asset unless, at the time the expenditure was incurred, it was expected that the useful life of the asset would continue after the end of the claim period in which the asset was to be first used in a way which would constitute use in connection with an oil field for the purposes of that section.

(3)Subject to subsection (4) below, the oil field to which are attributable tariff receipts or disposal receipts referable to a qualifying asset is that field for which the expenditure referred to in subsection (1)(b) above is allowable; and, if there is more than one such field, then,—

(a)in the case of a mobile asset, no account shall be taken of a field to which it is not dedicated; and

(b)no account shall be taken of a field in relation to which the asset is a qualifying asset by virtue only of paragraph 1 of Schedule 1 to this Act; and

(c)subject to paragraphs (a) and (b) above [F3and subsection (3A) below], it is that one of those fields in relation to which a development decision was first made;

and subsection (7) of section 5A of the principal Act (time when development decision is made) shall have effect for the purposes of paragraph (c) above [F3and subsection (3A) below] as it has effect for the purposes of subsection (1)(c) of that section.