What does Oil Taxation Act 1983 Schedule 2 paragraph 6 amend?

Schedule 2 paragraph 6 amends paragraph 19 of Schedule 17 to the Finance Act 1980, which governs transfers of interests in oil fields. It extends the existing exclusion of long-term asset disposals from relief to also cover the new section 7 relief introduced by the Oil Taxation Act 1983, ensuring consistent treatment across both provisions.

Why are long-term asset disposals excluded from relief during oil field interest transfers?

Long-term assets such as platforms or pipelines are excluded from relief to prevent participators from claiming tax benefits on these assets when transferring their field interest. The amendment ensures that neither the original relief nor the section 7 relief under the 1983 Act applies, maintaining consistent taxation treatment for such disposals under United Kingdom law.

How does this amendment affect petroleum revenue tax calculations on field interest transfers?

When calculating the petroleum revenue tax position on a transfer of a field interest, any long-term asset disposals connected with that transfer must be excluded from both relief provisions. The disposing participator cannot claim either the original relief or the section 7 relief in respect of those long-term assets.

What is an example of how this paragraph applies in practice?

If Company A transfers its 30% oil field interest to Company B and disposes of its share of a production platform, this amendment prevents Company A from claiming relief under both the original Finance Act 1980 provision and section 7 of the Oil Taxation Act 1983 in respect of the platform disposal.

Oil Taxation Act 1983 Schedule 2 paragraph 6

Transfers of interests in oil fields: disposal of long-term assets

Schedule 2 paragraph 6 amends the rules on transferring interests in oil fields to ensure that disposals of long-term assets are excluded from both the original relief provisions and the new relief introduced by the Oil Taxation Act 1983.

This paragraph amends Schedule 17, paragraph 19 of the Finance Act 1980, which deals with transfers of interests in oil fields.
The original provision already excluded disposals of long-term assets from a particular relief; this amendment extends that exclusion to also cover the new section 7 relief under the Oil Taxation Act 1983.
Section 7 of the Oil Taxation Act 1983 provides relief for certain expenditure, and this amendment ensures that relief does not apply when long-term assets are disposed of as part of a field interest transfer.
The effect is that when a participator transfers their interest in an oil field, any disposal of long-term assets connected with that transfer cannot benefit from either the original relief or the new section 7 relief.

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