Oil Taxation Act 1983 section 4

Expenditure related to exempt gas and deballasting

Section 4 deals with adjustments to allowable expenditure on long-term assets where some of the asset's use relates to exempt gas (gas not subject to petroleum revenue tax) or to deballasting operations, and provides rules for bringing certain otherwise excluded expenditure back into the PRT regime where it generates tariff or disposal receipts.

• Where a long-term asset is partly used in connection with exempt gas, a just and reasonable proportion of the expenditure must be excluded from the amounts otherwise allowable for PRT relief.
• Similarly, where a long-term asset is partly used for deballasting, a just and reasonable proportion of the related expenditure must be excluded from allowable expenditure.
• If expenditure fails to qualify solely because of the exempt gas rule, but the asset generates tariff receipts or is enhanced in value ahead of a disposal giving rise to disposal receipts, the relevant portion of the asset's use is treated as connected to the oil field from which the exempt gas is won — thereby bringing that expenditure back within the PRT regime.
• Where expenditure on enhancing an asset's value would otherwise qualify under subsection (5) but the asset has been used to generate tax-exempt tariffing receipts at any time in the six years before the expenditure was incurred, the qualifying amount is reduced by applying the same mechanism used to reduce disposal receipts under section 7A.

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