Part VI Companies, oil, insurance etc.
Chapter II Oil and mining industries
Oil exploration and exploitation
194 Disposals of oil licences relating to undeveloped areas.
1
In this section any reference to a disposal (including a part disposal) is a reference to a disposal made by way of a bargain at arm’s length.
2
If, at the time of the disposal, the licence relates to an undeveloped area, then, to the extent that the consideration for the disposal consists of—
a
another licence which at that time relates to an undeveloped area or an interest in another such licence, or
b
an obligation to undertake exploration work or appraisal work in an area which is or forms part of the licensed area in relation to the licence disposed of,
the value of that consideration shall be treated as nil for the purposes of this Act.
3
If the disposal of a licence which, at the time of the disposal, relates to an undeveloped area is part of a larger transaction under which one party makes to another disposals of 2 or more licences, each of which at the time of the disposal relates to an undeveloped area, the reference in subsection (2)(b) above to the licensed area in relation to the licence disposed of shall be construed as a reference to the totality of the licensed areas in relation to those 2 or more licences.
4
In relation to a disposal of a licence which, at the time of the disposal, relates to an undeveloped area, being a disposal—
a
which is a part disposal of the licence in question, and
b
part but not the whole of the consideration for which falls within paragraph (a) or paragraph (b) of subsection (2) above,
section 42 shall not apply unless the amount or value of the part of the consideration which does not fall within one of those paragraphs is less than the aggregate of the amounts which, if the disposal were a disposal of the whole of the licence rather than a part disposal, would be—
i
the relevant allowable expenditure, as defined in section 53; and
ii
the indexation allowance on the disposal.
5
Where section 42 has effect in relation to such a disposal as is referred to in subsection (4) above, it shall have effect as if, for subsection (2) thereof, there were substituted the following subsection—
2
The apportionment shall be made by reference to—
a
the amount or value of the consideration for the disposal on the one hand (call that amount or value A), and
b
the aggregate referred to in section 194(4) on the other hand (call that aggregate C),
and the fraction of the said sums allowable as a deduction in computing the amount of the gain (if any) accruing on the disposal shall be—
and the remainder shall be attributed to the part of the property which remains undisposed of.