In section 10 of the Oil Taxation Act 1975 (modifications of Part 1 in connection with gas sold to the British Gas Corporation under contracts made before end of June 1975), for subsection (3) (modified apportionment rule for expenditure allowable under section 3(1)(a), (b), (c), (hh), (i) or (j)) substitute—

“(3)

Subsections (3A) to (3H) below apply where, in the case of any taxable field, the oil—

(a)

won and saved from the field, or

(b)

expected to be won and saved from the field,

includes oil falling within subsection (1)(a) above.

(3A)

Any expenditure allowable under section 3 of this Act for the field by virtue of any of paragraphs (a) to (c) of section 3(1) of this Act shall be a proportion of what it would otherwise have been.

(3B)

The proportion mentioned in subsection (3A) above is that which, according to estimates submitted to the Secretary of State after the end of June 1975 and approved by him as reasonable, the field’s original reserves of oil exclusive of oil falling within subsection (1)(a) above bear to the field’s original reserves of oil inclusive of oil so falling.

(3C)

Until estimates have been submitted and approved for the purpose of subsection (3B) above, the expenditure allowable for the field under section 3 of this Act by virtue of section 3(1)(a), (b) or (c) of this Act shall be deemed to be nil.

(3D)

Any expenditure allowable under section 3 of this Act for the field by virtue of section 3(1)(hh) of this Act shall be a portion of what it would otherwise have been.

(3E)

That portion is determined in accordance with the following rules—

1.

Identify the abandonment guarantee (within the meaning given by section 104 of the Finance Act 1991 (c. 31)) on the obtaining of which the expenditure was incurred.

2.

Identify the liabilities covered by the guarantee.

3.

Identify which of those liabilities relate to qualifying assets.

4.

Identify the portion of the expenditure that it is just and reasonable to apportion to the liabilities identified under rule 3.

5.

Identify the qualifying assets to which the liabilities identified under rule 3 relate.

6.

Identify the use of those qualifying assets that has been (or is expected to be) non-excluded use.

7.

Assume that expenditure is incurred on the provision of those qualifying assets and identify the proportion of the hypothetical expenditure that it would be just and reasonable to apportion to the use of those assets identified under rule 6.

8.

The portion mentioned in subsection (3D) above is then determined by multiplying—

(i)

the portion identified under rule 4, by

(ii)

the proportion (expressed as a fraction) identified under rule 7.

(3F)

Any expenditure allowable under section 3 of this Act for the field by virtue of section 3(1)(i) or (j) of this Act shall be a portion of what it would otherwise have been.

(3G)

That portion is determined in accordance with the following rules—

1.

Identify the qualifying asset that is relevant to the incurring of the expenditure.

2.

Identify the use of that qualifying asset that has been non-excluded use.

3.

Assume that expenditure is incurred on the provision of that qualifying asset and identify the proportion of the hypothetical expenditure that it would be just and reasonable to apportion to the use of that asset identified under rule 2.

4.

The portion mentioned in subsection (3F) above is then determined by multiplying—

(i)

the expenditure, by

(ii)

the proportion (expressed as a fraction) identified under rule 3.

(3H)

In subsections (3E) and (3G) above—

“non-excluded use” means—

(a)

use in connection with the winning and saving of oil, other than excluded oil, from the field, or

(b)

use giving rise to receipts that, for the purposes of the Oil Taxation Act 1983 (c. 56), are tariff receipts attributable to a participator in the field;

“qualifying asset” has the same meaning as it has for the purposes of the Oil Taxation Act 1983 (see section 8 of that Act).”.