Oil Taxation Act 1975 Schedule 4 paragraph 2

Restrictions on expenditure allowable under section 3 or 4

Schedule 4 paragraph 2 restricts the amount of expenditure that can be claimed as an allowance for petroleum revenue tax purposes when assets are acquired, created or improved through transactions between connected persons or transactions not conducted at arm's length.

• When assets are acquired, created or enhanced in value through non-arm's length or connected party transactions, the allowable expenditure is capped at the lowest of several specified amounts
• The caps include the cost in the most recent arm's length transaction for the same asset (excluding loan-related costs), the open market value of the asset, and any disposal receipts recognised by the other party
• The restrictions apply equally to expenditure on acquiring interests in assets, renting or hiring assets, and obtaining services or facilities connected with asset use
• Two persons are treated as connected if they meet the connected persons definition in the Corporation Tax Act 2010

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