Corporation Tax Act 2010 section 280

Disposal to be valued by reference to section 2(5A) of OTA 1975

Section 280 modifies the calculation of corporation tax profits where a company sells crude oil from a UK field at arm's length and the sale contract requires the seller to bear transportation costs.

• Where oil from a UK field is sold crude at arm's length and the seller must meet transportation costs, the sale proceeds are replaced for corporation tax purposes with deemed proceeds based on a hypothetical sale where the seller does not bear those transport costs.
• This deemed price effectively equals the actual sale price minus the transportation costs to the nearest landing point (or, for onshore fields, the place of extraction), using the valuation method in section 2(5A) of OTA 1975.
• To prevent double counting, the company must not claim a separate deduction for transportation costs (a "transportation allowance") against either its ring fence profits or its non-ring-fence profits, because that cost is already netted off in arriving at the deemed price.
• The adjustment applies only to the selling company; it has no impact on the purchaser's corporation tax position.