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Oil Taxation Act 1975

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This is the original version (as it was originally enacted).

4Allowance of expenditure on long-term assets

(1)Subject to subsection (13) below, this section applies to expenditure (whether or not of a capital nature) which is incurred by a person at or before the time when he is a participator in an oil field, being expenditure incurred in acquiring, bringing into existence, or enhancing the value of an asset which is to be or is subsequently used in connection with the field and whose useful life continues after the end of the claim period in which it is first so used:

Provided that this section shall not apply to expenditure incurred as aforesaid 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 this Part of this Act for the field and so notify the responsible person.

(2)The following provisions of this section are subject to Schedules 4, 5 and 6 to this Act.

(3)In the case of expenditure incurred otherwise than in acquiring or bringing into existence a brought-in asset, the whole of the expenditure shall (subject to the following provisions of this section) be allowable under this section on a claim under Schedule 5 or 6 to this Act for the first relevant claim period if, but only if—

(a)after the expenditure was incurred, the asset was in that period used (if at all) only in connection with the field; and

(b)at the end of that period it was reasonable to assume that the asset would from then until the end of its useful life be used only in connection with the field; and

(c)the asset is not a mobile asset.

(4)If the whole of the expenditure is not by virtue of subsection (3) above allowable on a claim for the first relevant claim period, subsections (5) and (6) below shall apply as regards that claim period.

(5)Subject to the following provisions of this section, a proportion of the expenditure shall be allowable under this section on a claim for the first relevant claim period, and that proportion is—

(a)if, at the end of that period, a reasonable estimate can be made of the proportion which the time during which the asset will eventually have been used in connection with the field in the period between the incurring of the expenditure or the asset's first use in that connection (whichever is later) and the date on which its useful life is reasonably likely to end bears to the time between the incurring of the expenditure and that date, the same proportion as that estimated proportion;

(b)in any other case, the proportion which the time during which the asset has been used in that connection in the period between the incurring of the expenditure or the asset's first use in that connection (whichever is later) and the end of the first relevant claim period bears to the time between the incurring of the expenditure and the date when the asset's useful life is reasonably likely to end:

Provided that, where the asset was not used for any purpose in the period between the incurring of the expenditure and the asset's first use in connection with the field, the expenditure shall for the purposes of this subsection be treated as having been incurred on the date when the asset was first used in connection with the field.

(6)In the case of a mobile asset, the proportion of the expenditure allowable by virtue of subsection (5) above on a claim for the first relevant claim period shall not exceed the proportion which the time during which the asset was used in connection with the field in the period mentioned in paragraph (b) of that subsection bears to the time between the incurring of the expenditure and the end of that claim period:

Provided that, where the asset was not used for any purpose in the period between the incurring of the expenditure and the asset's first use in connection with the field, the expenditure shall for the purposes of this subsection be treated as having been incurred on the date when the asset was first used in connection with the field.

(7)Whether or not the whole of the expenditure is by virtue of subsection (3) above allowable under this section on a claim for the first relevant claim period, for each subsequent claim period up to and including that in which use of the asset in connection with the field permanently ceases, the proportion of the expenditure allowable under this section for the relevant period shall be computed by applying the provisions of subsections (5) and (6) above with the omission of the words " on a claim " (wherever occurring) and the substitution of references to the relevant period for references to the first relevant claim period. For the purposes of this subsection

the relevant period, in relation to a claim period, means the period consisting of that claim period and each earlier claim period back to and including that in which the expenditure was incurred.

(8)If, as computed under subsection (7) above for any claim period, the proportion of the expenditure allowable for the relevant period exceeds the amount thereof which (taking into account any previous adjustments made under the following subsection) has been allowed on claims made for earlier claim periods falling within the relevant period, the excess shall be allowable under this section on a claim for that claim period.

(9)If, as computed under subsection (7) above for any claim period, the proportion of the expenditure allowable for the relevant period is exceeded by the amount thereof which (taking into account any previous adjustments made under this subsection) has been allowed on claims made for earlier claim periods falling within the relevant period, the total amount of expenditure allowable under this and the preceding section on a claim for the first-mentioned claim period shall be reduced by an amount equal to the excess.

(10)Subsections (3) to (5) of section 3 of this Act shall apply for the purposes of this section as they apply for the purposes of that section; and where in accordance with subsection (9) above the total amount of the expenditure allowable under this and the preceding section on a claim for any claim period is reduced, the amount falling to be taken into account under section 2(9)(b)(ii) or (c)(ii) of this Act by reference to that expenditure shall be reduced by a proportion equal to the proportion by which the total amount of that expenditure is so reduced.

(11)For the purposes of subsections (5) and (6) above (including those subsections as they apply under subsection (7) above) an asset which is throughout any period of time simultaneously used partly in connection with the field and partly otherwise shall be treated as being used in connection with the field for a proportion of that period equal to the proportion which the extent of its use in the period in that connection bears to the extent of its use in the period in that connection and otherwise.

(12)For the purposes of this section—

(a)the asset is a brought-in asset if, between the time when it was acquired or brought into existence and its first use in connection with the field, the asset was used otherwise than in connection with the field; and

(b)" the first relevant claim period "—

(i)in the case of expenditure incurred in acquiring or bringing into existence a brought-in asset, means the claim period in which the asset was first used in connection with the field ; and

(ii)in the case of any other expenditure, means the claim period in which the expenditure was incurred.

(13)The preceding provisions of this section, and any other provisions in this Part of this Act as to which it is provided that this subsection applies, shall, with any necessary modifications, apply in relation to expenditure incurred by a person in acquiring an interest in an asset, or in bringing into existence an asset in which he is to have an interest, or in enhancing the value of an asset in which he has an interest, as the provisions in question apply in relation to expenditure incurred by a person in acquiring, bringing into existence, or enhancing the value of an asset, as the case may be.

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