The Qualifying Oil Fields Order 2012

EXPLANATORY NOTE

(This note is not part of the Order)

This Order defines large deep water oil fields (“LDOF”) and large shallow water gas fields (“LSGF”) and specifies that oil fields that satisfy either definition are “qualifying oil fields” for the purposes of Chapter 7, Part 8 of the Corporation Tax Act 2010 (c.4) (“CTA 2010”). Companies holding a licence or a share in a licence in “qualifying oil fields” are entitled to a “field allowance” which reduces the extent to which their profits are subject to the supplementary charge. In addition, this Order revokes the Field Allowance for New Oil Fields Order 2010 (S.I. 2010/610) (“the 2010 Order”) which specified that deep water gas fields (“DWGF”) are “qualifying fields” and incorporates the amendments made by the 2010 Order directly into the CTA 2010. Finally, this Order extends the definition of a “small oil field” (“SOF”), which is an existing form of “qualifying oil field”, from a field which has reserves of 3,500,000 tonnes or less to one which has reserves of 7,000,000 tonnes or less; and increases the amount of the total field allowance available to SOF from £75,000,000 to £150,000,000.

Article 3 amends section 352 CTA, which defines a “qualifying oil field”, and extends the definition so as to include LDOF, LSGF and DWGF.

Article 4 amends section 353 CTA substituting, for the purpose of defining the maximum permitted size of a SOF, a reference to 3,500,000 tonnes with a figure of 7,000,000 tonnes.

Article 5 inserts three additional sections, 355A-C, into the CTA; these prescribe the characteristics of LDOF, LSGF and DWGF respectively.

Article 6 amends 356(2) CTA, which sets out the way in which the total field allowance is calculated, increasing the maximum value of the total field allowance for small oil fields from £75,000,000 to £150,000,000. It also inserts three additional sub-sections, 356(4)-(6), which prescribe respectively the way in which the total field allowance is to be calculated for LDOF, LSGF and DWGF; finally, it inserts an additional subsection, 356(8), which specifies the total field allowance to which an oil field is entitled in circumstances where it satisfies the definition of more than one category of “qualifying oil field”.

Article 8 provides that the entitlement to field allowances in respect of LDOF and LSGF, and the amendments to the criteria for determining a SOF and the maximum amount of relief, are to apply retrospectively. The power to make such retrospective provision is section 349(3)(b) CTA 2010.

A Tax Information and Impact Note covering this instrument was published on 23rd October 2012 alongside a draft of this instrument and is available on the HMRC website at http://www.hmrc.gov.uk/thelibrary/tiins.htm. It remains an accurate summary of the impacts that result from this instrument.