Finance Act 2009

Section 90

SCHEDULE 44 U.K. Supplementary charge: reduction for certain new oil fields

Part 1 U.K. Reduction of adjusted ring fence profits

1 (1) A company's adjusted ring fence profits for an accounting period are to be reduced by the amount of the company's pool of field allowances for that accounting period (see Part 2). U.K.

(2) But, if the profits are less than the amount of the pool, the profits are to be reduced to nil.

Part 2 U.K. Pool of field allowances

Company's pool of field allowances U.K.

2 U.K. A company's pool of field allowances for an accounting period (“the relevant accounting period”) is—

where—

P is the amount of the company's pool of field allowances for the previous accounting period that has been carried into the relevant accounting period (see paragraphs 3 and 4), and

R is the aggregate of the amounts of field allowances for new oil fields which the company holds (see Part 3) that are activated in respect of—

• (a) the relevant accounting period (see Part 4), and

• (b) reference periods that fall within the relevant accounting period (see Part 5).

Carrying part of pool of field allowances into following period U.K.

3 (1) This paragraph applies if— U.K.

(a) a company has a pool of field allowances for an accounting period (“accounting period 1”), and

(b) the company's adjusted ring fence profits for accounting period 1 are reduced to nil in accordance with paragraph 1(2).

(2) A part of the company's pool of field allowances for accounting period 1 is to be carried into the following accounting period (“accounting period 2”).

(3) The part to be carried into accounting period 2 is—

where—

F is the amount of the company's pool of field allowances for accounting period 1, and

P is the amount of the adjusted ring fence profits for accounting period 1.

Carrying whole of pool of field allowances into following period U.K.

4 (1) This paragraph applies if a company— U.K.

(a) has a pool of field allowances for an accounting period, but

(b) has no adjusted ring fence profits for the accounting period.

(2) The whole of the company's pool of field allowances for the accounting period is to be carried into the following accounting period.

Part 3 U.K. Field allowance: when held and unactivated amount

Initial licensee to hold a field allowance U.K.

5 (1) A company that is an initial licensee in a new oil field is to hold a field allowance for that field as from the beginning of the authorisation day. U.K.

(2) The amount of the field allowance which the licensee is to hold at that time is—

where—

T is the amount of the total field allowance for the field (see paragraph 24), and

S is the share of the equity in the field which the initial licensee has at the beginning of the authorisation day.

Holding a field allowance on acquisition of equity share U.K.

6 U.K. For provision about holding a field allowance by virtue of the acquisition of a share of the equity in a new oil field, see paragraph 15(2).

Unactivated amount of a field allowance U.K.

7 (1) This paragraph applies if a company holds a field allowance for a new oil field by virtue of paragraph 5 or 15(2). U.K.

(2) The unactivated amount of that allowance at a particular time (“the relevant time”) is—

where—

R is the amount of the field allowance which the company held before the relevant time by virtue of paragraph 5 or 15(2),

E is the total amount of the field allowance received before the relevant time by virtue of paragraph 15(1) (company already holding field allowance acquires equity share),

A is the total amount of the field allowance activated in respect of—

• (a) accounting periods ending before the relevant time, or

• (b) reference periods ending before the relevant time, and

D is the total amount of reductions in the field allowance made before the relevant time by virtue of paragraph 14 (company disposes of equity share).

(3) A company ceases to hold a field allowance for a new oil field if the unactivated amount of that allowance falls to nil.

Part 4 U.K. No change in equity share: activation of allowance

Introduction U.K.

8 (1) This Part applies to a company in respect of a new oil field and an accounting period if the following conditions are met. U.K.

(2) Condition A is that the company is a licensee in the field for the whole of the accounting period.

(3) Condition B is that the company's share of the equity in the field is the same during the whole of the accounting period.

(4) Condition C is that the company holds an unactivated amount of field allowance for the field at the beginning of the accounting period.

(5) Condition D is that the company has relevant income from the new oil field in the accounting period.

Activation of field allowance U.K.

9 (1) An amount of the company's field allowance for the new oil field is to be activated in respect of the accounting period. U.K.

(2) The amount of the field allowance to be activated is the smallest of the following amounts—

(a) the relevant activation limit,

(b) the company's relevant income from the field in the accounting period, and

(c) the unactivated amount of the field allowance which the company holds at the beginning of the accounting period.

(3) The relevant activation limit is—

where—

T is the amount of the total field allowance for the field (see paragraph 24),

E is the company's share of the equity in the field during the accounting period, and

N is the number of days in the accounting period.

Part 5 U.K. Change in equity share: activation of allowance

Introduction U.K.

10 (1) This Part applies to a company in respect of a new oil field and an accounting period if the following conditions are met. U.K.

(2) Condition A is that the company is a licensee in the field for the whole, or for part, of the accounting period.

(3) Condition B is that the company's share of the equity in the field is different at different times during the accounting period.

(4) Condition C is that the company holds an unactivated amount of field allowance for the field at any time during the accounting period.

(5) Condition D is that the company has relevant income from the field in the accounting period.

(6) In a case where a company has three or more different shares of the equity in a new oil field during a particular day, this Part (in particular provisions relating to the beginning or end of a day) has effect subject to the necessary modifications.

Reference periods U.K.

11 (1) For the purposes of this Part, the accounting period, or (if the company is not a licensee for the whole of the accounting period) the part or parts of the accounting period for which the company is a licensee, is to be divided into reference periods. U.K.

(2) A reference period is a period of consecutive days that meets the following conditions.

(3) Condition A is that, at the beginning of each day in the period, the company is a licensee in the new oil field.

(4) Condition B is that, at the beginning of each day in the period, the company's share of the equity in the field is the same.

(5) Condition C is that, at the beginning of the first day of the period, the company holds an unactivated amount of field allowance for the field.

(6) Condition D is that each day in the period falls within the accounting period.

Activation of field allowance U.K.

12 (1) An amount of the company's field allowance for the new oil field is to be activated in respect of each reference period. U.K.

(2) The amount of the field allowance to be activated is the smallest of the following amounts—

(a) the relevant activation limit,

(b) the company's relevant income from the field in the reference period, and

(c) the unactivated amount of the field allowance which the company holds at the beginning of the reference period.

(3) The relevant activation limit is—

where—

T is the amount of the total field allowance for the field (see paragraph 24),

E is the company's share of the equity in the field during the reference period, and

R is the number of days in the reference period.

(4) The company's relevant income from the field in the reference period is—

where—

I is the company's relevant income from the field in the whole of the accounting period,

R is the number of days in the reference period, and

L is the number of days in the accounting period for which the company is a licensee in the new oil field.

Part 6 U.K. Change in equity share: transfer of field allowance

Introduction U.K.

13 (1) This Part applies if the following conditions are met. U.K.

(2) Condition A is that a company that is a licensee in a new oil field (“the transferor”) disposes of the whole or a part of its share of the equity in the new oil field (and in this Part each of those to which a share of the equity is disposed of is referred to as “a transferee”).

(3) Condition B is that, immediately before the disposal, the transferor holds an unactivated amount of field allowance for the new oil field.

(4) Sub-paragraph (5) applies when—

(a) determining (for the purposes of this paragraph) whether a transferor holds an unactivated amount of field allowance immediately before the disposal (“the relevant time”), and

(b) determining (for the purposes of paragraph 14) the unactivated amount of field allowance which a transferor holds at the relevant time;

but it applies only if an amount of field allowance for the new oil field (“the relevant amount”) has, by virtue of paragraph 12, been activated in respect of the reference period that ends because of the disposal.

(5) When making the determination, the relevant amount of the field allowance must be treated as having been activated at a time before the relevant time.

(6) In a case where a company has three or more different shares of the equity in a new oil field during a particular day, this Part (in particular provisions relating to the beginning or end of a day) has effect subject to the necessary modifications.

Reduction of field allowance if equity disposed of U.K.

14 (1) The unactivated amount of the field allowance for the new oil field which the transferor holds immediately before the disposal is to be reduced by the following amount— U.K.

where—

F is the unactivated amount of the field allowance which the transferor holds immediately before the disposal,

E1 is the transferor's share of the equity in the new oil field immediately before the disposal, and

E2 is the transferor's share of the equity in the new oil field immediately after the disposal.

(2) This paragraph has effect at the end of the day on which the disposal takes place.

Acquisition of field allowance if equity acquired U.K.

15 (1) If a transferee holds a field allowance for the new oil field immediately before the disposal, the unactivated amount of the field allowance is to be increased by the amount calculated in accordance with sub-paragraph (4). U.K.

(2) If a transferee does not hold a field allowance for the new oil field immediately before the disposal, the transferee is to hold a field allowance for the new oil field.

(3) The amount of the field allowance which the transferee is to hold is calculated in accordance with sub-paragraph (4).

(4) The amount referred to in sub-paragraphs (1) and (3) is—

where—

R is the amount of the reduction determined in accordance with paragraph 14,

E3 is the share of the equity in the new oil field that the transferee has acquired from the transferor, and

E1 and E2 are the same as in paragraph 14.

(5) This paragraph has effect at the end of the day on which the disposal takes place.

Part 7 U.K. Miscellaneous

Adjustments U.K.

16 U.K. If there is any alteration in a company's adjusted ring fence profits for an accounting period after this Schedule has had effect in relation to the profits, any necessary adjustments to the operation of this Schedule (whether in relation to the profits or otherwise) are to be made (including any necessary adjustments to the effect of Part 1 on the profits or to the calculation of the company's pool of field allowances for a subsequent accounting period).

Orders U.K.

17 (1) The Commissioners for Her Majesty's Revenue and Customs may by order make provision about the oil fields that are qualifying oil fields for the purposes of this Schedule. U.K.

(2) The Commissioners for Her Majesty's Revenue and Customs may by order make provision about the amount of the total field allowance for any description of new oil field (whether or not provision has been made under sub-paragraph (1) about that description of new oil field).

(3) An order under this paragraph may, in particular, amend any or all of paragraphs 20 to 24.

(4) An order under this paragraph is to be made by statutory instrument.

(5) No order may be made under this paragraph unless a draft of the instrument containing it has been laid before, and approved by a resolution of, the House of Commons.

Part 8 U.K. Interpretation

New oil fields U.K.

18 U.K. In this Schedule “new oil field” means an oil field—

(a) which is a qualifying oil field, and

(b) whose development is authorised at any time on or after 22 April 2009.

Authorising development U.K.

19 (1) In this Schedule a reference to authorisation of development of an oil field is a reference to a national authority— U.K.

(a) granting a licensee consent for development for the field,

(b) serving on a licensee a programme of development for the field, or

(c) approving a programme of development for the field.

(2) In this paragraph—

• “consent for development”, in relation to an oil field, does not include consent which is limited to the purpose of testing the characteristics of an oil-bearing area;

• “development”, in relation to an oil field, means winning oil from the field otherwise than in the course of searching for oil or drilling wells;

• “national authority” means—

  (a)

  the Secretary of State, or

  (b)

  a Northern Ireland Department.

Qualifying oil fields U.K.

20 U.K. In this Schedule “qualifying oil field” means an oil field that is, on the authorisation day—

(a) a small oil field,

(b) an ultra heavy oil field, or

(c) an ultra high pressure/high temperature oil field.

Small oil field U.K.

21 (1) In this Schedule “small oil field” means an oil field which has reserves of oil of 3,500,000 tonnes or less. U.K.

(2) For the purposes of this paragraph and paragraph 24(2)—

(a) the amount of reserves of oil which an oil field has is to be determined on the authorisation day;

(b) 1,100 cubic metres of gas at a temperature of 15 degrees celsius and pressure of one atmosphere is to be counted as equivalent to one tonne.

Ultra heavy oil field U.K.

22 (1) In this Schedule “ultra heavy oil field” means an oil field with oil at— U.K.

(a) an API gravity below 18 degrees, and

(b) a viscosity of more than 50 centipoise at reservoir temperature and pressure.

(2) For that purpose API gravity, in relation to oil, is the amount determined by the following calculation—

where G is the specific gravity of the oil at 15.56 degrees celsius.

Ultra high pressure/high temperature oil field U.K.

23 U.K. In this Schedule “ultra high pressure/high temperature oil field” means an oil field with oil at—

(a) a pressure of more than 1034 bar in the reservoir formation, and

(b) a temperature of more than 176.67 degrees celsius in the reservoir formation.

Total field allowance for new oil field U.K.

24 (1) For the purposes of this Schedule the total field allowance for a new oil field is— U.K.

(a) in the case of a small oil field, the amount determined in accordance with sub-paragraph (2),

(b) in the case of an ultra heavy oil field, £800,000,000, and

(c) in the case of an ultra high pressure/high temperature oil field, £800,000,000.

(2) The total field allowance for a small oil field is—

(a) if the oil field has reserves of oil of 2,750,000 tonnes or less, £75,000,000, and

(b) in any other case (where the oil field has reserves of more than 2,750,000 tonnes but not more than 3,500,000 tonnes), the following amount—

where X is the amount of the reserves of oil (in tonnes) which the oil field has.

Other interpretation U.K.

25 U.K. In this Schedule—

• “adjusted ring fence profits”, in relation to a company and an accounting period, means the adjusted ring fence profits that would (if this Schedule were ignored) be taken into account in calculating the supplementary charge on the company under section 501A of ICTA for the accounting period;

• “authorisation day”, in relation to a new oil field, means the day when development of the field is authorised;

• “initial licensee”, in relation to a new oil field, means a company that is licensee in the field on the authorisation day.

• “licensee” has the same meaning as in Part 1 of OTA 1975;

• “oil” has the same meaning as in Part 1 of OTA 1975;

• “oil field” has the same meaning as in Part 1 of OTA 1975;

• “relevant income”, in relation to a new oil field and an accounting period of a company, means production income of the company from any oil extraction activities carried on in the field that is taken into account in calculating the company's adjusted ring fence profits for the accounting period.