Oil Taxation Act 1983 section 2

Dedicated mobile assets

Section 2 sets out the rules for determining when a mobile asset (such as a drilling rig or floating production vessel) becomes "dedicated" to a particular oil field, which affects how expenditure on that asset is treated for petroleum revenue tax purposes.

• A mobile asset becomes dedicated to an oil field in a claim period if it is used in connection with that field during the period, was not already dedicated to it, and it is reasonable to assume that it will be used mainly in connection with that field for its remaining useful life or until production ceases.
• An asset can also become dedicated to a field before it is first used there, provided expenditure on creating the asset is incurred in an earlier claim period and the forward-looking use assumptions are met at the end of that earlier period — enabling the participator to claim expenditure sooner.
• The "relevant period" over which the future-use assumptions are tested runs from the end of the claim period in question (or the expected date of first use, for pre-use dedication) until either the end of the asset's useful life or the permanent cessation of oil winning from the field, whichever comes first.
• If a mobile asset was only treated as dedicated because of the early (pre-use) dedication rule, and it later becomes apparent that the future-use assumptions are no longer reasonable, the asset is treated as never having been dedicated to that field, and any related expenditure allowance decisions are revisited accordingly.

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