Corporation Tax Act 2010

Oil valuation

280 Disposal to be valued by reference to section 2(5A) of OTA 1975

(1) This section applies if each of conditions A to G is met.

(2) Condition A is that oil is won from an oil field in the United Kingdom.

(3) Condition B is that there is a disposal of the oil by a company.

(4) Condition C is that the disposal is a disposal of the oil by the company crude in a sale at arm’s length (as defined in paragraph 1 of Schedule 3 to OTA 1975).

(5) Condition D is that the circumstances are such that the price received or receivable—

(a) falls to be taken into account under section 2(5)(a) of that Act in calculating for petroleum revenue tax purposes the assessable profit or allowable loss accruing to the company in a chargeable period from the oil field, or

(b) would fall to be so taken into account, had the oil field been a taxable field (as defined in section 185 of FA 1993).

(6) Condition E is that the terms of the contract are such as are described in the opening words of section 2(5A) of OTA 1975 (transportation etc).

(7) Condition F is that, but for subsection (9), the company is not entitled to a transportation allowance in respect of the oil in calculating ring fence profits.

(8) Condition G is that the company does not claim a transportation allowance in respect of the oil in calculating for corporation tax purposes any profits that are not ring fence profits.

(9) Section 2(5A) of OTA 1975 is to apply in determining the amount which the company is to bring into account for the purposes of the charge to corporation tax on income in respect of the disposal as it applies (or would apply) for petroleum revenue tax purposes.

(10) In this section “transportation allowance”, in relation to any oil, means—

(a) a deduction in respect of the expense of transporting the oil as mentioned in the opening words of section 2(5A) of OTA 1975,

(b) a deduction in respect of any costs of or incidental to the transportation of the oil as so mentioned, or

(c) any such reduction in the price to be regarded as received or receivable for the oil as would result from the application of section 2(5A) of OTA 1975, if that provision applied for corporation tax purposes.

281 Valuation where market value taken into account under section 2 of OTA 1975

(1) This section applies if a person disposes of oil in circumstances such that the market value of the oil—

(a) falls to be taken into account under section 2 of OTA 1975, otherwise than by virtue of paragraph 6 of Schedule 3 to that Act, in calculating for petroleum revenue tax purposes the assessable profit or allowable loss accruing to that person in a chargeable period from an oil field, or

(b) would so fall but for section 10 of that Act.

(2) For the purposes of the charge to corporation tax on income, the disposal of the oil, and its acquisition by the person to whom it was disposed of, are to be treated as having been for a consideration equal to the market value of the oil—

(a) as so taken into account under section 2 of that Act, or

(b) as would have been so taken into account under that section but for section 10 of that Act.

282 Valuation where disposal not sale at arm’s length

(1) This section applies if conditions A, B and C are met.

(2) Condition A is that a person disposes of oil acquired by the person—

(a) in the course of oil extraction activities carried on by the person, or

(b) as a result of oil rights held by the person.

(3) Condition B is that the disposal is not a sale at arm’s length (as defined in paragraph 1 of Schedule 3 to OTA 1975).

(4) Condition C is that section 281 does not apply in relation to the disposal.

(5) For the purposes of the charge to corporation tax on income, the disposal of the oil, and its acquisition by the person to whom it was disposed of, are to be treated as having been for a consideration equal to the market value of the oil.

(6) Paragraphs 2 and 3A of Schedule 3 to OTA 1975 (definition of market value of oil including light gases) apply for the purposes of this section as they apply for the purposes of Part 1 of that Act, but with the following modifications.

(7) Those modifications are that—

(a) any reference in paragraph 2 to the notional delivery day for the actual oil is to be read as a reference to the day on which the oil is disposed of as mentioned in this section, and

(b) paragraph 2(4) is to be treated as omitted.

283 Valuation where excess of nominated proceeds

(1) This section applies if an excess of nominated proceeds for a chargeable period—

(a) is taken into account in calculating a company’s profits under section 2(5)(e) of OTA 1975, or

(b) would have been so taken into account if the company were chargeable to tax under OTA 1975 in respect of an oil field.

(2) For the purposes of the charge to corporation tax on income, the amount of the excess is to be added to the consideration which the company is treated as having received in respect of oil disposed of by it in the period.

(3) For corporation tax purposes, that amount is to be available to the company as a deduction in calculating the profits of any trade which (whether because of section 279 or otherwise) does not consist of activities falling within the definition of “oil-related activities” in section 274.

284 Valuation where relevant appropriation but no disposal

(1) This section applies if conditions A and B are met.

(2) Condition A is that a company makes a relevant appropriation of oil without disposing of it.

(3) Condition B is that the company does so in circumstances such that the market value of the oil—

(a) falls to be taken into account under section 2 of OTA 1975 in calculating for petroleum revenue tax purposes the assessable profit or allowable loss accruing to it in a chargeable period from an oil field, or

(b) would so fall but for section 10 of that Act.

(4) For the purposes of the charge to corporation tax on income, the company is to be treated as having, at the time of the appropriation—

(a) sold the oil in the course of the separate trade consisting of activities falling within the definition of “oil-related activities” in section 274, and

(b) purchased it in the course of the separate trade consisting of activities not so falling.

(5) For those purposes, that sale and purchase is to be treated as having been at a price equal to the market value of the oil—

(a) as so taken into account under section 2 of OTA 1975, or

(b) as would have been so taken into account under that section but for section 10 of that Act.

(6) In this section “relevant appropriation” has the meaning given by section 12(1) of OTA 1975.

285 Valuation where appropriation to refining etc

(1) This section applies if conditions A, B and C are met.

(2) Condition A is that a company appropriates oil acquired by it—

(a) in the course of oil extraction activities carried on by it, or

(b) as a result of oil rights held by it.

(3) Condition B is that the oil is appropriated to refining or to any use except the production purposes of an oil field (as defined in section 12(1) of OTA 1975).

(4) Condition C is that section 284 does not apply in relation to the appropriation.

(5) For the purposes of the charge to corporation tax on income—

(a) the company is to be treated as having, at the time of the appropriation, sold and purchased the oil as mentioned in section 284(4)(a) and (b), and

(b) that sale and purchase is to be treated as having been at a price equal to the market value of the oil.

(6) Paragraphs 2 and 3A of Schedule 3 to OTA 1975 (definition of market value of oil including light gases) apply for the purposes of this section as they apply for the purposes of Part 1 of that Act, but with the following modifications.

(7) Those modifications are that—

(a) any reference in paragraph 2 to the notional delivery day for the actual oil is to be read as a reference to the day on which the oil is appropriated as mentioned in this section,

(b) any reference in paragraphs 2 and 2A to oil being relevantly appropriated is to be read as a reference to its being appropriated as mentioned in this section, and

(c) paragraph 2(4) is to be treated as omitted.