Oil Taxation Act 1975 Schedule 4 paragraph 5

Disposal of long-term asset formerly used in connection with an oil field

Paragraph 5 of Schedule 4 deals with the tax treatment when a long-term asset that was previously used in connection with an oil field is disposed of, requiring the disposal proceeds to be brought into account as a receipt of that field.

• When a long-term asset that qualified for expenditure relief in connection with a particular oil field is subsequently disposed of, the disposal receipts must be brought into account as tariff receipts of that field.
• The amount treated as a receipt is the disposal consideration, but this is capped so that it cannot exceed the total allowable expenditure originally claimed for that asset in relation to the field.
• If the asset was used in connection with more than one oil field, the disposal proceeds are apportioned between those fields on a just and reasonable basis.
• These provisions apply regardless of whether the oil field is still producing at the time of the disposal, ensuring that tax relief previously given is clawed back when the asset is sold or otherwise disposed of.

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