Part 8Oil activities

Chapter 4Calculation of profits

Tariff receipts etc

291Tariff receipts etc

(1)

Subsection (5) applies to a sum which meets conditions A, B and C.

(2)

Condition A is that the sum constitutes a tariff receipt F1... of a person who is a participator in an oil field.

(3)

Condition B is that the sum constitutes consideration in the nature of income rather than capital.

(4)

Condition C is that the sum would not, but for subsection (5), be treated as mentioned in that subsection.

(5)

The sum is to be treated as a receipt of the separate trade mentioned in section 279.

(6)

So far as they would not otherwise be so treated, the activities—

(a)

of a participator in an oil field, or

(b)

of a person connected with the participator,

in making available an asset in a way which gives rise to tariff receipts F2... of the participator are to be treated for the purposes of this Part as oil extraction activities.

(7)

In determining for the purposes of subsection (2) whether a sum constitutes a tariff receipt F3... of a person who is a participator, no account may be taken of any sum which—

(a)

is in fact received or receivable by a person connected with the participator, and

(b)

constitutes a tariff receipt F3... of the participator.

But in relation to the person by whom such a sum is actually received, subsection (2) has effect as if the person were a participator and as if condition A were met.

(8)

References in this section to a person connected with a participator include a person with whom the person is associated, within the meaning of paragraph 11 of Schedule 2 to the Oil Taxation Act 1983, but section 1176(1) of this Act (meaning of “connected” persons) does not apply for the purposes of this section.

F4(9)

In this section, “tariff receipt” has the meaning given by section 291A.

(10)

So far as it would not otherwise be the case, anything that constitutes a tariff receipt or a tax-exempt tariffing receipt for the purposes of the Oil Taxation Act 1983 is to be treated as a “tariff receipt” for the purposes of this section.

F5291AMeaning of “tariff receipt”

(1)

A “tariff receipt” of a participator in an oil field is the amount or value of any consideration received or receivable by the person in respect of—

(a)

the use of a ring fence asset, or

(b)

the provision of services or other business facilities (of whatever kind) in connection with the use, otherwise than by the participator, of a ring fence asset.

(2)

“Ring fence asset” means a qualifying asset which is, or has been, used wholly or partly for the purposes of a ring fence trade.

(3)

“Qualifying asset” means an asset other than—

(a)

land or an interest in land, or

(b)

a building or structure which—

(i)

is situated on land, and

(ii)

does not fall within any of sub-paragraphs (i) to (iv) of paragraph (c) of section 3(4) of OTA 1975 (allowable expenditure: exclusions).

(4)

But an amount does not constitute a tariff receipt if the amount—

(a)

is, in relation to the person giving it, expenditure in respect of interest or any other pecuniary obligation incurred in obtaining a loan or any other form of credit,

(b)

is referable to the use of a qualifying asset for, or the provision of services or facilities in connection with, deballasting, or

(c)

is referable to other use of an asset, except use wholly or partly for an oil purpose.

(5)

Any consideration which includes an amount within subsection (4)(a) to (c) is to be apportioned in a just and reasonable manner.

(6)

In subsection (4)(c), the reference to use of an asset for an oil purpose is a reference to—

(a)

use in connection with an oil field (including use giving rise to receipts which, for the purposes of this Part, are tariff receipts), and

(b)

use for any other purpose (apart from a purpose falling within section 3(1)(b) of OTA 1975 (allowable expenditure: payment in connection with a relevant licence)) of a separate trade consisting of oil-related activities.

291BTariff receipts: counteraction of avoidance arrangements

(1)

Subsection (2) applies if an arrangement has been entered into, the main purpose or one of the main purposes of which is to obtain a tax advantage by reference to section 291.

(2)

The relevant tax advantage is to be counteracted by the making of such adjustments as are just and reasonable.

(3)

Any adjustments required to be made under this section (whether or not by an officer of Revenue and Customs) may be made by way of—

(a)

an assessment,

(b)

the modification of an assessment,

(c)

amendment or disallowance of a claim,

or otherwise.

(4)

In this section—

“arrangement” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);

“tax advantage” has the meaning given by section 1139.