What does Schedule 3 paragraph 10 of the Oil Taxation Act 1975 allow a participator to do?

Paragraph 10 allows a participator in a United Kingdom oil field to elect to spread tariff receipts and certain disposal receipts, referred to in section 2(9)(b) and (c), back over earlier chargeable periods rather than having the full amount taxed in the single period in which it arises, smoothing the petroleum revenue tax charge over time.

What is the time limit for making a spreading election under paragraph 10 of Schedule 3?

The participator must make the election by notice to HMRC within two years of the end of the chargeable period in which the tariff receipts or disposal receipts would otherwise fall to be taxed. Once validly made, HMRC adjusts assessments for the relevant earlier periods to reflect the allocated amounts.

How are the spread amounts allocated across earlier chargeable periods?

Once an election is made, the total amount is allocated across the relevant earlier chargeable periods on a just and reasonable basis. HMRC then adjusts assessments for those periods accordingly, and the participator's petroleum revenue tax position is recalculated to reflect the spreading of receipts over the periods of underlying economic activity.

What is the practical benefit of electing to spread receipts under paragraph 10?

The practical benefit is preventing a spike in petroleum revenue tax liability in a single chargeable period when large one-off tariff or disposal payments are received. Spreading ensures a fairer reflection of economic activity across periods, which is particularly valuable where payments relate to infrastructure use or oil disposals spanning multiple periods.

Oil Taxation Act 1975 Schedule 3 paragraph 10

Election to have amounts mentioned in section 2(9)(b) and (c) spread

Schedule 3 paragraph 10 allows a participator in an oil field to elect to spread certain tariff receipts and disposal receipts across earlier chargeable periods, rather than having them all taxed in a single period.

A participator who receives tariff receipts or tax-exempt disposal receipts can elect to have those amounts spread back over earlier chargeable periods, reducing the impact of a large one-off charge.
The election must be made by notice to HMRC within two years of the end of the chargeable period in which the amounts would otherwise be assessed.
When an election is made, the total amount is allocated across the earlier periods on a just and reasonable basis, and assessments for those periods are adjusted accordingly.
The spreading mechanism applies to amounts referred to in section 2(9)(b) and (c) of the Oil Taxation Act 1975, which relate to receipts from providing tariff services and certain oil disposals connected with the field.

Access full legislation.And much more.

By becoming a member, your team gets full access to Tax World research tools and source-backed tax resources.

Become a member