Oil Taxation Act 1975 section Schedule 5 paragraph 2A

Claim periods and claims

Section Schedule 5 paragraph 2A deals with how abandonment expenditure is attributed for tax relief purposes when one participator in an oil field defaults on its obligation to pay its share and another participator steps in to cover the shortfall.

• When a current participator defaults on a payment due under a relevant agreement or abandonment programme, and another current or former participator makes a payment to cover that default, the payment is called a "default payment".
• The default payment is attributed to the contributing participator (the one who steps in) for the purposes of claiming tax allowance on the abandonment expenditure, rather than being treated as expenditure of the defaulter.
• The amount attributed to the contributing participator is capped at either the amount they are required to meet under the relevant agreement or abandonment programme, or any amount they are directed to pay under Part 4 of the Petroleum Act 1998.
• The defaulter's own share of allowable abandonment expenditure is reduced (or eliminated entirely) by the total of all default payments attributed to contributing participators who stepped in to cover the default.