Oil Taxation Act 1975 section 3

Allowance of expenditure (other than expenditure on long-term assets and abortive exploration expenditure)

Section 3 sets out which types of operational expenditure incurred by a participator in an oil field may be deducted when calculating petroleum revenue tax, excluding spending on long-term assets and abortive exploration (which are dealt with separately).

• A wide range of field-related costs are allowable, including exploration, appraisal, winning oil, transporting it to its first UK landing point, initial treatment and storage, crude oil disposal costs, licence payments, decommissioning, and abandonment guarantee costs
• Certain categories of expenditure are specifically excluded, notably interest and financing costs, land acquisition costs (other than licence payments), most buildings and structures (unless directly used in oil winning, measuring, initial treatment/storage, or onward transport), payments linked to oil production volumes or profits, and payments to acquire an interest in oil from the field
• Where a qualifying asset used for decommissioning or restoration has at some point been used for non-qualifying purposes, only a just and reasonable proportion of the decommissioning or restoration expenditure is allowable, based on the extent of its qualifying use
• Expenditure that qualifies for uplift supplement must relate to specific capital-intensive purposes such as bringing the field into production, appraising the field, substantially improving production or transport rates, or providing initial treatment or storage installations