Taxation of Chargeable Gains Act 1992 section 195F

Reimbursed expenditure

Section 195F deals with how expenditure on an oil licence is treated for chargeable gains purposes when it has been reimbursed by the acquiring company in a licence swap arrangement.

• Where a company disposes of an oil licence under a licence-consideration swap or mixed-consideration swap, certain pre-disposal expenditure on that licence may be reimbursed by the acquiring company
• The expenditure must have been incurred before the disposal and must be of the type that enhances or preserves the value of the asset (as normally allowable under section 38(1)(b))
• The reimbursement can take any form — including an adjustment to any non-licence consideration — and can occur before, on, or after the date of the disposal
• When reimbursed, the expenditure is re-allocated: it is treated as having been incurred by the acquiring company on the licence immediately after the disposal, and it retains its character as allowable enhancement expenditure