Oil Taxation Act 1983 section 7

Reduction of allowable expenditure where a new asset was used outside taxable fields before its first use in the relevant oil field

Section 7 deals with the reduction of allowable expenditure on a new asset where, during the period between its acquisition and its first use in a non-exempt oil field, it was used either outside taxable fields or in a way that generated tax-exempt tariffing receipts.

• Where a new asset is used outside taxable fields (or generates tax-exempt tariffing receipts) during the gap between acquisition and first use in the relevant oil field, the allowable expenditure must be reduced
• If the asset was used in connection with an exempt field during that gap period and it was not originally expected to be used in connection with any oil field at all, the allowable expenditure is reduced to nil
• Where the nil reduction does not apply, the expenditure is reduced by a fraction that reflects the proportion of the asset's useful life consumed before it was first used in the relevant oil field
• An exempt field is one where all the oil won from it is excluded oil as defined in the Oil Taxation Act 1975

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