Taxation of Chargeable Gains Act 1992

196 Interpretation of sections 194 [F1 to [F2 195F]] . U.K.

(1) For the purposes of section 194 [F3 and this section], a [F4 UK licence] relates to an undeveloped area at any time if—

(a) for no part of the licensed area has consent for development been granted to the licensee by the [F5 Oil and Gas Authority] on or before that time; and

(b) for no part of the licensed area has a programme of development been served on the licensee or approved by the [F5 Oil and Gas Authority] on or before that time.

[F6 (1A) For the purposes of section 194 a licence other than a UK licence relates to an undeveloped area at any time if, at that time—

(a) no development has actually taken place in any part of the licensed area; and

(b) no condition for the carrying out of development anywhere in that area has been satisfied—

(i) by the grant of any consent by the authorities of a country or territory exercising jurisdiction in relation to the area; or

(ii) by the approval or service on the licensee, by any such authorities, of any programme of development.]

[F7 (1B) In sections 195A to [F8 195F], a reference to a UK licence that relates to a developed area is a reference to any UK licence apart from one that relates to an undeveloped area.]

(2) Subsections (4) and (5) of section 36 of the M1 Finance Act 1983 (meaning of “development") shall have effect in relation to [F9 subsections (1) [F10 to (1B)] above] as they have effect in relation to subsection (2) of that section.

(3) In relation to a licence under the M2 Petroleum (Production) Act (Northern Ireland) 1964 any reference in subsection (1) [F11 or (1B)] above to the [F5 Oil and Gas Authority] shall be construed as a reference to the Department of Economic Development.

(4) In relation to a disposal to which section 194 applies of a licence under which the buyer acquires an interest in the licence only so far as it relates to part of the licensed area, any reference in subsection (1) or subsection (3) of that section or subsection (1) above to the licensed area shall be construed as a reference only to that part of the licensed area to which the buyer’s acquisition relates.

[F12 (5) In sections 194 [F13 to [F14 195F]] and this section—

• “foreign oil concession” means any right to search for or win overseas petroleum, being a right conferred or exercisable (whether or not by virtue of a licence) in relation to a particular area;

• “interest” in relation to a licence, includes, where there is an agreement which—

  (a)

  relates to oil from the whole or any part of the licensed area, and

  (b)

  was made before the extraction of the oil to which it relates,

  any entitlement under that agreement to, or to a share of, either that oil or the proceeds of its sale;

• “licence” means any UK licence or foreign oil concession;

• [F15 “licence-consideration swap” has the meaning given in section 195A(2);]

• “licensed area” (subject to subsection (4) above)—

  (a)

  in relation to a UK licence, has the same meaning as in Part I of the M3 Oil Taxation Act 1975; and

  (b)

  in relation to a foreign oil concession, means the area to which the concession applies;

• “licensee”—

  (a)

  in relation to a UK licence, has the same meaning as in Part I of the Oil Taxation Act 1975; and

  (b)

  in relation to a foreign oil concession, means the person with the concession or any person having an interest in it;

• [F16 “mixed consideration” means consideration that consists partly of disposal of a UK licence;]

• [F16 “mixed-consideration swap” has the meaning given in section 195A(2);]

• [F16 “no gain/no loss amount”, in relation to a company that disposes of a UK licence, means the amount that would be taken to be the consideration for the disposal if section 56(2) applied to the disposal;]

• [F16 “non-licence consideration” means consideration that does not consist of disposal of a UK licence, F17 ... ;]

• “oil”—

  (a)

  except in relation to a UK licence, means any petroleum (within the meaning of [F18 Part I of the Petroleum Act 1998]); and

  (b)

  in relation to such a licence, has the same meaning as in Part I of the Oil Taxation Act 1975;

• “overseas petroleum” means any oil that exists in its natural condition at a place to which neither [F18 Part I of the Petroleum Act 1998] nor the M4 Petroleum (Production) Act (Northern Ireland) 1964 applies; and

• [F16 “swap arrangements”, in relation to a licence-consideration swap or a mixed-consideration swap, means the arrangements under which the swap takes place;]

• “UK licence” means a licence within the meaning of Part I of the M5 Oil Taxation Act 1975.

(5A) References in sections 194 and 195 to a part disposal of a licence shall include references to the disposal of any interest in a licence.]

[F19 (5B) Subsections (5C) to (5F) apply for the purposes of sections 195A to 195F.

(5C) Any determination—

(a) of the consideration given for disposal A or disposal B,

(b) of the non-licence consideration, or

(c) of the value of a licence comprised in disposal A or disposal B,

is to be made as at the time the swap arrangements are entered into.

But this is subject to subsections (5D) to (5F).

(5D) Subsections (5E) and (5F) apply if, under the swap arrangements, economic benefits and liabilities under the licences concerned are treated as passing at a time (“the effective time”) which falls before or after the day on which the arrangements are entered into.

(5E) Any determination—

(a) of the consideration given for disposal A or disposal B,

(b) of the non-licence consideration, or

(c) of the value of a licence comprised in disposal A or disposal B,

is to be made as at the effective time.

(5F) But if the swap arrangements make provision for an increase in the non-licence consideration to reflect the period between the effective time and the time it is payable, the non-licence consideration is to be treated as if it were the amount found by making a corresponding increase in the amount determined under subsection (5E).]

(6) In section 194—

(a) “exploration work”, in relation to any area, means work carried out for the purpose of searching for oil anywhere in that area;

(b) “appraisal work”, in relation to any area, means work carried out for the purpose of ascertaining the extent or characteristics of any oil-bearing area the whole or part of which lies in the area concerned or what the reserves of oil of any such oil-bearing area are.

Textual Amendments

F1 Words in s. 196 heading substituted (with effect in accordance with Sch. 40 para. 8 of the amending Act) by Finance Act 2009 (c. 10), Sch. 40 para. 6(2)

F2 Word in s. 196 heading substituted (with effect in accordance with Sch. 15 para. 4 of the amending Act) by Finance Act 2011 (c. 11), Sch. 15 para. 3(2)

F3 Words in s. 196(1) inserted (with effect in accordance with Sch. 40 para. 8 of the amending Act) by Finance Act 2009 (c. 10), Sch. 40 para. 6(3)

F4 Words in s. 196(1) substituted (with effect in accordance with s. 181(4) of the amending Act) by Finance Act 1996 (c. 8), s. 181(1)

F5 Words in s. 196 substituted (1.10.2016) by The Petroleum (Transfer of Functions) Regulations 2016 (S.I. 2016/898), regs. 1(2), 11

F6 S. 196(1A) inserted (with effect in accordance with s. 181(4) of the amending Act) by Finance Act 1996 (c. 8), s. 181(2)

F7 S. 196(1B) inserted (with effect in accordance with Sch. 40 para. 8 of the amending Act) by Finance Act 2009 (c. 10), Sch. 40 para. 6(4)

F8 Word in s. 196(1B) substituted (with effect in accordance with Sch. 15 para. 4 of the amending Act) by Finance Act 2011 (c. 11), Sch. 15 para. 3(3)

F9 Words in s. 196(2) substituted (with effect in accordance with s. 181(4) of the amending Act) by Finance Act 1996 (c. 8), s. 181(2)

F10 Words in s. 196(2) substituted (with effect in accordance with Sch. 40 para. 8 of the amending Act) by Finance Act 2009 (c. 10), Sch. 40 para. 6(5)

F11 Words in s. 196(3) substituted (with effect in accordance with Sch. 40 para. 8 of the amending Act) by Finance Act 2009 (c. 10), Sch. 40 para. 6(6)

F12 S. 196(5)(5A) substituted for s. 196(5) (retrospectively and with effect in accordance with s. 181(4)(5) of the amending Act) by Finance Act 1996 (c. 8), s. 181(3)

F13 Words in s. 196(5) substituted (with effect in accordance with Sch. 40 para. 8 of the amending Act) by Finance Act 2009 (c. 10), Sch. 40 para. 6(7)(a)

F14 Word in s. 196(5) substituted (with effect in accordance with Sch. 15 para. 4 of the amending Act) by Finance Act 2011 (c. 11), Sch. 15 para. 3(4)(a)

F15 Words in s. 196(5) inserted (with effect in accordance with Sch. 40 para. 8 of the amending Act) by Finance Act 2009 (c. 10), Sch. 40 para. 6(7)(b)

F16 Words in s. 196(5) inserted (with effect in accordance with Sch. 40 para. 8 of the amending Act) by Finance Act 2009 (c. 10), Sch. 40 para. 6(7)(c)

F17 Words in s. 196(5) omitted (with effect in accordance with Sch. 15 para. 4 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 15 para. 3(4)(b)

F18 Words in s. 196(5) substituted (15.2.1999) by Petroleum Act 1998 (c. 17), s. 52(4), Sch. 4 para. 32(3) (with Sch. 3); S.I. 1999/161, art. 2(1)

F19 S. 196(5B)-(5F) substituted for s. 196(5B) (with effect in accordance with Sch. 15 para. 4 of the amending Act) by Finance Act 2011 (c. 11), Sch. 15 para. 3(5)

Modifications etc. (not altering text)

C1 S. 196 modified (temp.) (9.2.2018) by The Scotland Act 2016 (Onshore Petroleum) (Consequential Amendments) Regulations 2018 (S.I. 2018/79), regs. 1(2), 4 (with art. 2)

Marginal Citations

M1 1983 c. 28.

M2 1964 c. 28 (N.I.).

M3 1975 c. 22.

M4 1964 c. 28 (N.I.).

M5 1975 c. 22.