Part 8Oil activities
Chapter 7Reduction of supplementary charge for certain new oil fields
Reduction of adjusted ring fence profits
333Reduction of adjusted ring fence profits
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 sections 334 to 336).
2
But, if the profits are less than the amount of the pool, the profits are to be reduced to nil.
Pool of field allowances
334Company’s pool of field allowances
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 sections 335 and 336), and
R is the aggregate of the amounts of field allowances for new oil fields which the company holds (see sections 337 to 339) that are activated in respect of—
- a
the relevant accounting period (see sections 340 and 341), and
- b
reference periods that fall within the relevant accounting period (see sections 342 to 344).
- a
335Carrying part of pool of field allowances into following period
1
This section applies if —
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 section 333(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.
336Carrying whole of pool of field allowances into following period
1
This section applies if a company—
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.
Field allowance: when held and unactivated amount
337Initial licensee to hold a field allowance
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.
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 section 356), and
S is the share of the equity in the field which the initial licensee has at the beginning of the authorisation day.
338Holding a field allowance on acquisition of equity share
For provision about holding a field allowance by virtue of the acquisition of a share of the equity in a new oil field, see section 347(2).
339Unactivated amount of field allowance
1
This section applies if a company holds a field allowance for a new oil field by virtue of section 337 or 347(2).
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 section 337 or 347(2),
E is the total amount of the field allowance received before the relevant time by virtue of section 347(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
- a
D is the total amount of reductions in the field allowance made before the relevant time by virtue of section 346 (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.
Miscellaneous
348Adjustments
1
This section applies if there is any alteration in a company’s adjusted ring fence profits for an accounting period after this Chapter has had effect in relation to the profits.
2
Any necessary adjustments to the operation of this Chapter (whether in relation to the profits or otherwise) are to be made (including any necessary adjustments to the effect of section 333 on the profits or to the calculation of the company’s pool of field allowances for a subsequent accounting period).
349Orders
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 Chapter.
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 subsection (1) about that description of new oil field).
3
An order under this section may, in particular, amend any or all of sections 352 to 356.
4
No order may be made under this section unless a draft of the statutory instrument containing it has been laid before and approved by a resolution of the House of Commons.
Interpretation
350“New oil field”
In this Chapter “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.
351“Authorisation of development of an oil field”
1
In this Chapter a reference to authorisation of development of an oil field is a reference to a national authority—
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 section—
“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, and
“national authority” means—
- a
the Secretary of State, or
- b
a Northern Ireland department.
- a
352“Qualifying oil field”
In this Chapter “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.
353“Small oil field”
1
In this Chapter “small oil field” means an oil field which has reserves of oil of 3,500,000 tonnes or less.
2
For the purposes of this section and section 356(2)—
a
the amount of reserves of oil which an oil field has is to be determined on the authorisation day, and
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.
354“Ultra heavy oil field”
1
In this Chapter “ultra heavy oil field” means an oil field with oil at—
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.
355“Ultra high pressure/high temperature oil field”
In this Chapter “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.
356“Total field allowance for a new oil field”
1
For the purposes of this Chapter, the total field allowance for a new oil field is—
a
in the case of a small oil field, the amount determined in accordance with subsection (2),
b
in the case of an ultra heavy oil field, £800,000,000, and
c
in the cases 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.
357Other definitions
In this Chapter—
“adjusted ring fence profits”, in relation to a company and an accounting period, means the adjusted ring fence profits that would (if this Chapter were ignored) be taken into account in calculating the supplementary charge on the company under section 330(1) 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, and
“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.