Modifications etc. (not altering text)
C1See Finance Act 1986 (c. 41), s. 109(6); Advance Petroleum Revenue Tax Act 1986 (c. 68, SIF 63:1), s. 2(2)
Part I (ss. 1-12) applied (6.3.1992 with effect as mentioned in s. 289(1)(2) of the amending Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 199(7)(c), 289 (with ss. 60, 101(1), 171, 201(3)).
Part I (ss. 1-12) applied (6.3.1992 with effect as mentioned in s. 289(1)(2) of the amending Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 276(5), 289 (with ss. 60, 101(1), 171, 201(3)).
C2Part I (ss. 1-12) construed (16.7.1992) with s. 74 of Finance (No. 2) Act 1992 c. 48 by s. 74(6) of that 1992 Act.
Part I (ss. 1-12) construed (27.7.1993) with Pt. III (other than s. 194), of 1993 c. 34 by s. 195(3) of that 1993 Act.
Pt. I (ss. 1-12) construed (3.5.1994) with Pt. V of 1994 c. 9 by s. 257(2) of that 1994 Act
Pt. I (ss. 1-12) construed (27.7.1999) with ss. 95-97 by 1999 c. 16, s. 97(7)
Pt. I (ss. 1-12) construed (27.7.1999) with s. 98(7)(8) by 1999 c. 16, s. 98(7)
Pt. I (ss. 1-12) construed (11.5.2001) with s. 102(5)-(10) of 2001 c. 9 by s. 102(11) of that Act
Pt. I (ss. 1-12) construed (retrospective to 7.3.2001) with Sch. 32 of 2001 c. 9 by s. 101(4)(5), Sch. 32 para. 11 of that Act
(1)The exploration and appraisal expenditure which, subject to the provisions of this section and Schedule 7 to this Act, is allowable in the case of a person who is a participator in an oil field is any expenditure (whether or not of a capital nature) which—
(a)is incurred after 15th March 1983 by that person or, if that person is a company, by that company or a company associated with it in respect of the expenditure; and
(b)is so incurred wholly and exclusively for one or more of the purposes specified in subsection (2) below; and
(c)at the time it is so incurred, does not relate to a field for which a development decision has previously been made.
(2)The purposes referred to in subsection (1) above are—
(a)the purpose of searching for oil in [F2the territorial sea of the United Kingdom] or a designated area;
(b)the purpose of ascertaining the extent or characteristics of any oil-bearing area in [F2the territorial sea of the United Kingdom] or a designated area;
(c)the purpose of ascertaining what are the reserves of oil of any such oil-bearing area; and
(d)subject to subsection (3) below, the purpose of making to the Secretary of State any payment under or for the purpose of obtaining a licence (not being a payment by way of royalty or other periodic payment).
[F3(2A)Any reference in subsection (2) above to a designated area does not include a sector which, by virtue of subsection (3)(b) of section 107 of the Finance Act 1980 (transmedian fields), is deemed to be a designated area.]
(3)Expenditure incurred for the purpose mentioned in subsection (2)(d) above is not allowable under this section unless, at the time the allowance is claimed,—
(a)the licence to which the expenditure related has expired or has been determined or revoked; or
(b)part of the licensed area has been surrendered;
and where paragraph (b) above applies only that proportion of the expenditure which corresponds to the proportion of the licensed area which has been surrendered is expenditure falling within subsection (1) above.
(4)Subject to subsection (5) below, subsections (2) and (4) to (8) of section 5 of this Act apply for the purposes of this section as they apply for the purposes of that section.
(5)In the application for the purposes of this section of the provisions of section 5 of this Act referred to in subsection (4) above,—
(a)any reference in subsection (2) of section 5 to the purpose mentioned in subsection (1)(b) of that section shall be construed as a reference to any of the purposes specified in subsection (2) of this section;
(b)the reference in subsection (2)(a) of section 5 to subsection (1) of that section shall be construed as a reference to subsection (1) of this section; and
(c)the reference in subsection (6) of section 5 to a sum received—
[F4(i)includes a reference to a sum received, or treated by virtue of subsection (5A) below as received, from the disposal of oil won in the course of operations carried out for any of the purposes in paragraphs (a) to (c) of subsection (2) of this section; but
(ii)does not include a reference to a sum received for the assignment of any of the rights conferred by a licence or of any interest in a licensed area.]
[F5(5A)Subsection (5B) below applies in any case where—
(a)oil which is won as mentioned in paragraph (c)(i) of subsection (5) above is either disposed of otherwise than in sales at arm’s length or appropriated to refining or to any use except for production purposes of an oil field, and
(b)if that oil had been disposed of in a sale at arm’s length, then, by virtue of section 5(6) of this Act as applied by subsection (5) above, certain expenditure would have been reduced by reference to the receipt of a sum from that disposal.
(5B)Where this subsection applies, the oil concerned shall be treated for the purposes of subsection (5)(c)(i) above and section 5(6) of this Act as having been disposed of for a sum equal to its market value [F6at the material time] in the calendar month in which it was disposed of or appropriated as mentioned in subsection (5A)(a) above and, accordingly, for those purposes—
(a)a sum equal to that market value shall be treated as having been received from that disposal; and
(b)no account shall be taken of any sum actually received from the disposal of any of that oil.
(5C)In the application of Schedule 3 to this Act for the purpose of ascertaining the market value of oil as mentioned in subsection (5B) above,—
(a)in paragraph 2, in paragraph [F7(f)] of sub-paragraph (2) for the words from the beginning to “paragraph in question” there shall be substituted “the contract is for the sale of the whole quantity of oil whose market value falls to be ascertained for the purposes of section 5A(5B) of this Act”;
(b)sub-paragraphs (3) and (4) of paragraph 2 shall be omitted; and
(c)any reference in paragraphs 2 and 2A to oil being relevantly appropriated shall be construed as a reference to its being appropriated as mentioned in subsection (5A)(a) above.]
(6)Expenditure is not allowable under this section in connection with an oil field if, or to the extent that, it has been allowed under Schedule 5, Schedule 6 or Schedule 7 to this Act in connection with any oil field.
(7)For the purposes of subsection (1)(c) above, a development decision is made when—
(a)consent for development is granted to a licensee by the Secretary of State in respect of the whole or part of an oil field; or
(b)a programme of development is served on a licensee or approved by the Secretary of State for the whole or part of an oil field;
and subsections (4) and (5) of section 36 of the Finance Act 1983 (meaning of development etc.) apply in relation to this subsection as they apply in relation to subsections (2) and (3) of that section.
(8)If, at the time when it is incurred, expenditure relates to an area—
(a)which is not then an oil field, but
(b)in respect of which notice of a proposed determination has previously been given under paragraph 2(a) of Schedule 1 to this Act,
that area shall be treated for the purposes of this section as having become an oil field at the time the notice was given unless, when the actual determination is made, the area is not included in an oil field.]
Textual Amendments
F1S. 5A added by Finance Act 1983 (c. 49), s. 37(1) and Sch. 8 Part I
F2Words substituted by Finance Act 1985 (c. 54), s. 90(2) with respect to expenditure incurred on or after 1 April 1986
F3S. 5A(2A) added by Finance Act 1985 (c. 54), s. 90 with respect to expenditure incurred on or after 19 March 1985
F4S. 5A(5)(c)(i)(ii) substituted by Finance Act 1985 (c. 54), s. 90 with respect to expenditure incurred on or after 19 March 1985
F5S. 5A(5A)–(5C) added by Finance Act 1985 (c. 54), s. 90 with respect to expenditure incurred on or after 19 March 1985
F6Words repealed by Finance Act 1987 (c. 16), ss. 62(1)(b), 72(7) and Sch. 16 Part X for chargeable periods ending after 31 December 1986
F7 “(f)” substituted by Finance Act 1987 (c. 16), s. 62(3) and Sch. 11 para. 4 for chargeable periods ending after 31 December 1986
Modifications etc. (not altering text)
C4Also for the purposes of Oil Taxation Act 1983 (c. 56), s. 8(3) and Sch. 1 para. 6(1)