What does 'use' of an asset mean under Schedule 2 of the Oil Taxation Act 1983?

Under Schedule 2 paragraph 1, the 'use' of an asset includes not only the physical deployment of the asset itself but also the provision of any related services or other business facilities of any kind connected with that use. This ensures maintenance, logistics, and crew services all fall within scope for petroleum revenue tax purposes.

What counts as a 'disposal' of an asset for PRT purposes under this paragraph?

A 'disposal' under Schedule 2 paragraph 1 covers not only an outright sale or transfer of the entire asset but also the disposal of any interest in the asset, such as a partial share. Selling a 25% interest in a drilling rig, for example, constitutes a disposal within the meaning of the Schedule.

Why are the definitions of 'use' and 'disposal' broadened in this Schedule?

The broad definitions ensure that the petroleum revenue tax provisions in the rest of Schedule 2 apply consistently. They prevent avoidance by covering associated services and business facilities linked to asset use, and by capturing partial interest transfers alongside full disposals, maintaining comprehensive coverage of oil extraction asset transactions.

How does Schedule 2 paragraph 1 apply to services provided alongside an oil field asset?

If a company uses an asset such as a drilling rig on an oil field and also provides crew, maintenance, or supply-boat services in connection with that rig, all those associated services are treated as part of the 'use' of the asset. This brings them within the scope of Schedule 2's petroleum revenue tax provisions.

Oil Taxation Act 1983 section Schedule 2 para 1

Interpretation of "use" and "disposal" of assets

Schedule 2, paragraph 1 defines what is meant by the "use" and "disposal" of an asset for the purposes of the Schedule, broadening both terms beyond their everyday meanings.

The Schedule deals with the treatment of assets used in oil extraction activities for petroleum revenue tax purposes.
When the Schedule refers to the "use" of an asset, this includes the provision of any related services or other business facilities connected with that use.
When the Schedule refers to the "disposal" of an asset, this covers not only an outright disposal but also the disposal of any interest in the asset, such as a partial interest or a share.
These broad definitions ensure that associated services, facilities, and partial disposals are all brought within the scope of the Schedule's provisions.

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