Taxation of Chargeable Gains Act 1992 section 197

Disposals of interests in oil fields etc.: ring fence provisions

Section 197 creates a ring fence around capital gains and losses arising when a participator in an oil field disposes of all or part of their interest in that field, restricting how those gains and losses can be offset.

• Gains and losses from oil field interest disposals (material disposals) are aggregated each period into a single net gain or loss, kept within a ring fence separate from other capital gains and losses
• A ring fence net gain can only be reduced by ring fence losses from other periods, and a ring fence net loss can only be set against ring fence gains of later periods — not against ordinary capital gains or losses
• A company may claim within two years of the end of the chargeable period to convert all or part of a ring fence loss into an ordinary (non-ring fence) loss, making it available against non-ring fence gains
• Losses on material disposals to connected persons are excluded from the general aggregation and can only be offset against ring fence gains on disposals to the same connected person, with a similar two-year claim option to release any excess as a non-ring fence loss

---