Taxation of Chargeable Gains Act 1992 section 198J

Oil and gas: reinvestment after pre-trading disposal

Section 198J provides a capital gains tax relief for oil and gas exploration and appraisal companies that dispose of certain assets and reinvest the proceeds back into exploration, appraisal or ring fence trade activities.

• Companies engaged solely in oil and gas exploration and appraisal (not yet trading within the ring fence) can claim relief when they dispose of qualifying assets such as UK licences for undeveloped areas or assets used in licensed exploration areas.
• If the full disposal proceeds are reinvested within the permitted period (from 12 months before to 3 years after the disposal) in exploration and appraisal expenditure or oil assets used in a ring fence trade, the entire gain can be treated as non-chargeable upon making a claim.
• Where only part of the proceeds is reinvested, a partial relief may be available, reducing the chargeable gain to the amount of proceeds that were not reinvested, provided that unreinvested amount is less than the total gain on the disposal.
• The relief has been available for disposals made on or after 1 April 2014 and draws on existing roll-over relief rules (adapted for exploration and appraisal activities) to handle situations where assets were not used exclusively for qualifying purposes.