(1)Subsections (2) and (3) below apply where—
(a)a person (“the transferor”) disposes of any interest in an oil licence to another (“the transferee”) during the transitional period;
(b)part of the value of the interest is attributable to allowable exploration expenditure incurred by the transferor; and
(c)an election is made in accordance with this section specifying an amount as the amount to be treated as so attributable.
(2)Section 138 shall have effect in relation to the disposal as if—
(a)the disposal were a disposal by which an asset representing the allowable exploration expenditure ceases to belong to the transferor; and
(b)the disposal value of that asset were an amount equal to the amount specified in the election.
(3)For the purposes of Part IV, the amount of any expenditure incurred—
(a)by the transferee in acquiring the interest from the transferor, or
(b)by any person subsequently acquiring the interest (or an interest deriving from the interest),
which is taken to be attributable to expenditure incurred, before the disposal to the transferee, on mineral exploration and access shall be the lesser of the amount specified in the election and the amount which, apart from this subsection, would be taken to be so attributable.
(4)An election—
(a)shall be made by notice to the Board given by the transferor; and
(b)subject to subsection (5) below, shall not have effect unless a copy of it is served on the transferee and the transferee consents to it.
(5)If the Special Commissioners are satisfied—
(a)that the disposal was made under or in pursuance of an agreement entered into by the transferor and the transferee on the mutual understanding that a quantified (or quantifiable) part of the value of the interest disposed of was attributable to allowable exploration expenditure, and
(b)that the part quantified in accordance with that understanding and the amount specified in the election are the same,
they may dispense with the need for the transferee to consent to the election.
(6)Any question falling to be determined by the Special Commissioners under subsection (5) above shall be determined by them in like manner as if it were an appeal; but both the transferor and the transferee shall be entitled to appear and be heard by those Commissioners or to make representations to them in writing.
(7)Subject to subsection (8) below, an election may specify any amount, including a nil amount, as the amount to be treated as mentioned in subsection (1)(c) above.
(8)Where—
(a)a return has been made for a chargeable period of the transferor, and
(b)the return includes, at the time when it is made, an amount which, disregarding the provisions of this section, would be treated under section 138 as a trading receipt accruing in that period,
the election must not specify an amount less than the amount included in the return unless the Board agrees the lesser amount in question.
(9)An election made in accordance with this section—
(a)is irrevocable; and
(b)shall not be varied after it is made.
(10)For the purposes of this section a disposal is a disposal made during the transitional period if it is one made—
(a)before 13th September 1995; or
(b)on or after that date in pursuance of any obligation to make the disposal which, immediately before that date, was an unconditional obligation.
(11)For the purposes of subsection (10) above, the fact that a third party who is not connected with the transferor or the transferee may, by exercising any right or withholding any permission, prevent the fulfilment of an obligation does not prevent the obligation from being treated as unconditional.
(12)In subsection (11) above the reference to a third party is a reference to any person, body, government or public authority, whether within or outside the United Kingdom; and section 839 of the principal Act (connected persons) applies for the purposes of that subsection.
(13)All such assessments and adjustments of assessments shall be made as may be necessary to give effect to this section.]
Textual Amendments
F1Ss. 138A, 138B inserted (retrospectively) by Finance Act 1996 (c. 8), s. 180(1)