Oil Taxation Act 1975 Schedule 4 paragraph 6

Provisions supplementary to section 4(9) of this Act and paragraph 5(2) above

Schedule 4 paragraph 6 deals with the treatment of excess reduction amounts that arise when the total allowable expenditure for an oil field claim period has already been reduced to nil under the disposal and reuse provisions, but those provisions would have required a further reduction had there been sufficient expenditure to absorb it.

• Where the total allowable expenditure under sections 3 and 4 is reduced to nil by the disposal and reuse provisions (section 4(9) and Schedule 4 paragraph 5(2)), any further amount that would have been deducted — had there been enough expenditure — is identified as an excess.
• This excess amount is apportioned among the participators in the oil field in proportion to their respective shares of expenditure that would otherwise be deductible in computing profits (as determined under section 2(9)(b)(i)).
• Each participator's share of the excess is then added to their gross profit aggregate (under section 2(4)(a)) for the earliest chargeable period ending after that claim period, effectively increasing their assessable profit or reducing their allowable loss.
• The "relevant provisions" that can trigger this treatment are section 4(9), which deals with the tariff receipts offset against long-term asset expenditure, and Schedule 4 paragraph 5(2), which deals with disposal or cessation-of-use proceeds for long-term assets.

---