Oil Taxation Act 1983 section Schedule 2 paragraph 12

Tariff receipts arising from purchased oil processed through qualifying assets

Schedule 2 paragraph 12 deals with the situation where a participator (or a connected person) buys oil, takes delivery at the extraction point, processes it through a qualifying asset, and later sells it at a profit — treating part of that profit as a deemed tariff receipt.

• Where a participator or connected person purchases oil, takes delivery at the place of extraction, and uses a qualifying asset to transport, initially treat, or initially store it, any excess of the eventual selling price over the purchase price is treated as a tariff receipt.
• The "selling price" for this purpose is calculated using the same valuation rules that apply to oil won from a field under section 2(5) of the Oil Taxation Act 1975, and connected persons who purchased the oil are treated as if they were participators.
• The deemed tariff receipt rule does not apply if the oil is stored in the relevant field or used to assist extraction before the selling price is determined, nor does it apply where the oil's market value is used in the field profit calculation because the disposal was not at arm's length.
• For chargeable periods ending on or after 30 June 2004, the rule also does not apply if the processing would have generated a tax-exempt tariffing receipt had it been carried out under a contract entered into on or after 9 April 2003.