Oil Taxation Act 1975 section Sch 3 para 6A

Effect of certain transactions between participators

Section Sch 3 para 6A deals with how certain transfers of oil shares between participators in an oil field are treated for tax purposes, where the transferor remains responsible for the transferee's field obligations.

• Where one participator (the transferor) transfers all or part of their share of oil to another participator (the transferee) under an agreement where the transferor continues to carry out the transferee's field obligations relating to that share, special tax rules apply.
• For tax purposes, the oil shares of both the transferor and the transferee are treated as if the transfer had never taken place — each party's share remains as it was before the agreement.
• Any oil from the transferred share that is actually taken up by the transferee under the agreement is treated as having been disposed of and delivered to the transferee by the transferor at the time it is taken up.
• The effect is to create a deemed disposal and delivery for tax purposes, even though the underlying field obligations remain with the original participator.