Finance (No. 2) Act 1975

43 Oil: restriction on carrying forward of losses incurred before the end of 1972

(1) In the case of an oil company, as defined in this section, section 177(1) of the Taxes Act (carrying forward of losses) shall have effect subject to the provisions of this section; and in those provisions " the material time " means the end of the year 1972, and references to losses being set off are references to their being set off under the said section 177(1).

(2) Of the losses which the company incurred before the material time in its trade (other than losses excepted by subsection (5) below)—

(a) none shall be capable of being set off against trading income to which this paragraph applies; and

(b) the amount capable of being set off against other trading income arising after that time from the trade shall not exceed whichever of the amounts mentioned in subsection (4) below is the greater.

(3) Subsection (2) (a) above applies to the following trading income, that is to say—

(a) trading income arising after the material time from the separate trade consisting of activities falling within paragraph (a) or (b) of section 13(1) of the [1975 c. 22.] Oil Taxation Act 1975 (treatment of oil extraction activities etc. as a separate trade); and

(b) trading income which would fall within the preceding paragraph if in section 13(6) of that Act, so far as it relates to the operation of the said section 13(1), for the references to 11th July 1974 there were substituted references to 31st December 1972.

(4) The amounts referred to in subsection (2)(b) above are—

(a) the total amount of relevant trading income arising in the period beginning with 1st January 1973 and ending with 11th July 1974 ; and

(b) £50 million;

and in this subsection " relevant trading income " means trading income arising from the trade in which the losses mentioned in subsection (2) above were incurred, exclusive of trading income to which paragraph (a) of that subsection applies.

(5) There shall be excepted from the operation of subsection (2) above any losses which, if section 13(1) of the Oil Taxation Act 1975 had had effect as regards the chargeable period in which they were incurred, would have been treated as incurred in the separate trade consisting of activities falling within paragraph (a) or (b) of the said section 13(1).

(6) For the purposes of this section a company is an oil company if at the material time it carried on a trade the activities of which, at any time within the period of five years ending with the material time, included the acquisition, in the circumstances mentioned in paragraph (a) or (b) of subsection (7) below, of crude oil or the acquisition, in the circumstances mentioned in paragraph (c) of that subsection, of oil products, in substantial quantities.

(7) The circumstances referred to in subsection (6) above are that—

(a) the oil was extracted under rights exercisable by one or more companies associated with the company; or

(b) the oil was extracted under rights exercisable by another company and not less than 20 per cent, of that other company's ordinary share capital was owned directly or indirectly by one or more of the following, that is to say, the company and companies associated with it; or

(c) the oil products were acquired from one or more companies associated with the company and not resident in the United Kingdom, and the company was, at the time of the acquisition, associated with a company having rights to extract oil or with a company which (without regard to this paragraph) is or would but for subsection (8) below be an oil company.

(8) In relation to a company not resident in the United Kingdom references in this section to activities of a trade carried on by the company are only to activities carried on through a branch or agency in the United Kingdom.

(9) For the purposes of this section—

(a) two companies are associated with one another if one is under the control of the other or both are under the control of the same person or persons, and " control" has the meaning assigned to it by section 534 of the Taxes Act; and

(b) any question whether ordinary share capital is owned by a company directly or indirectly shall be determined as for the purposes of section 532 of the Taxes Act; and

(c) rights are exercisable by a company if they are exercisable by that company alone or jointly with another company or companies.

(10) In this section—

• " oil " does not include coal or anything won or capable of being won under the authority of a licence granted under either the [1934 c. 36.] Petroleum (Production) Act 1934 or the [1964 c. 28 (N.I.).] Petroleum (Production) Act (Northern Ireland) 1964 but, subject to that, includes any mineral oil or relative hydrocarbon;

• " oil products " means products which are derived from oil and are wholly or substantially of a hydrocarbon nature;

• " crude ", where the reference is to the acquisition of crude oil, refers to its acquisition without having been refined, and for the purposes of this definition refining does not include the subjecting of oil to any process of which the purpose is to enable it to be safely stored, safely loaded into a tanker or safely accepted by an oil refinery.