Oil Taxation Act 1975 section Sch 4 para 7

Insurance or compensation in respect of loss or destruction of long-term asset formerly used in connection with oil field

Section Sch 4 para 7 explains how insurance or compensation proceeds received for the loss or destruction of a long-term asset connected with an oil field are treated as a deemed disposal for petroleum revenue tax purposes.

• When a long-term asset used in connection with an oil field is lost or destroyed, any insurance or compensation received triggers the disposal rules.
• The recipient of the insurance or compensation is treated as though they had disposed of the asset (or their interest in it) for an amount equal to the insurance or compensation received.
• This deemed disposal treatment applies whether the insurance or compensation is received by a participator in the oil field or by a person connected with a participator.
• The definition of "connected persons" follows the standard corporation tax definition set out in section 1122 of the Corporation Tax Act 2010.