Oil Taxation Act 1975 section 3A

Definition of market value of light gases

Paragraph 3A of Schedule 3 defines how the market value of light gases is to be determined for the purposes of petroleum revenue tax, establishing the hypothetical sale conditions that must be applied.

• Market value is the price that light gases could reasonably be expected to fetch in an arm's length sale to a willing buyer, taking into account all circumstances relevant to the actual disposal or appropriation.
• The hypothetical sale contract must assume the gases have undergone appropriate initial treatment before delivery, and delivery must be at specified locations depending on whether extraction is onshore or offshore.
• Where the notional price would reasonably include certain payments related to gas sales (such as capacity payments as defined in section 114 of the Finance Act 1984), those provisions apply to the hypothetical contract in the same way as they would to an actual contract.
• The relevant circumstances include the timing and terms of the actual contract or arrangements under which the disposal took place, any subsequent variations, and the extent to which those real-world circumstances would reasonably be expected to exist in an arm's length transaction.