8.Under the PRT rules, oil companies have to submit a formal claim in order to obtain relief for their costs, and that claim is then considered by HM Revenue & Customs (HMRC). Sometimes oil companies would not get immediate relief for these costs. In the early days of oil exploration, when companies incurred substantial start-up costs, this deferral of relief could have a big impact on their cash-flow. PEA was therefore introduced to ensure that companies obtained partial advance relief in respect of these costs.
10.Now that North Sea exploration is long-established, and the large start-up costs have already been incurred, PEA is no longer needed. Furthermore, Government has become aware that the operation of PEA has had unintended and detrimental consequences to a few companies which have suffered a tax charge when their PEA has been clawed back in a later period.
11.Government, with the agreement of industry, has therefore repealed the PEA legislation.