Income Tax (Trading and Other Income) Act 2005 section 225I

Valuation where relevant appropriation but no disposal

Section 225I deals with the income tax treatment when an oil producer appropriates oil for use in another part of its business (such as refining) rather than selling it to a third party, requiring a deemed sale and purchase at market value.

• When an oil producer takes extracted oil into use in another of its own businesses instead of selling it, this is treated as both a sale and a purchase for income tax purposes
• The deemed sale is treated as occurring within the ring fence trade of oil extraction, and the deemed purchase as occurring within the non-ring fence trade
• The price used for both the deemed sale and purchase is the market value of the oil as determined for petroleum revenue tax purposes under the Oil Taxation Act 1975
• This rule applies whether the market value was actually taken into account for petroleum revenue tax or would have been taken into account but for an exemption under section 10 of the Oil Taxation Act 1975