What expenditure qualifies for relief under section 3 of the Oil Taxation Act 1983?

Expenditure incurred after 30 June 1982 on acquiring, creating, or enhancing a long-term asset used in connection with a United Kingdom oil field qualifies for relief. The asset must be either a fixed (non-mobile) asset or a mobile asset dedicated to that specific field. The full amount of qualifying expenditure is generally allowable in the relevant claim period.

What is the negligible effect exclusion under Oil Taxation Act 1983 section 3?

The Board has the power to disapply section 3 where it considers that including certain expenditure would have only a negligible effect on the total allowable expenditure for the oil field. In such cases, the Board must notify the responsible person for the field, and the expenditure falls outside the scope of this section.

How is a long-term asset defined under section 3 of the Oil Taxation Act 1983?

A long-term asset is defined as an asset whose useful life continues beyond the end of the claim period in which it is first used in connection with the oil field. This distinguishes it from short-lived or consumable items, which fall outside the scope of section 3 and would not qualify for relief under this provision.

How is the relevant claim period determined for brought-in assets under section 3?

For a brought-in asset — one originally used elsewhere — the relevant claim period is the one in which the asset is first used in connection with the oil field, disregarding any period in which a mobile asset was not dedicated to that field. For a mobile asset that became dedicated to the field, the relevant claim period is when dedication occurred.

Oil Taxation Act 1983 section 3

Expenditure incurred on long-term assets other than non-dedicated mobile assets

Section 3 sets out the rules for claiming relief on expenditure related to long-term assets used in connection with an oil field, where the assets are either fixed or are mobile assets dedicated to that field.

Expenditure incurred after 30 June 1982 on acquiring, creating, or enhancing a long-term asset used in an oil field may qualify for relief, provided the asset is either not mobile or is a mobile asset dedicated to that field.
The Board may exclude expenditure from this section if they consider its inclusion would have only a negligible effect on the total allowable expenditure for the field.
The full amount of qualifying expenditure is generally allowable in the relevant claim period, subject to certain exceptions relating to exempt gas, deballasting, and other specific provisions.
A long-term asset is defined as one whose useful life extends beyond the end of the claim period in which it is first used in connection with the oil field.

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