332DA Restriction where field qualified for field allowance as new field
(1) This section applies to expenditure which—
(a) is incurred by a company in relation to an oil field that was for the purposes of Chapter 7 a new oil field with an authorisation day before 1 January 2016,
(b) would in the absence of this section be relievable under section 332C, and
(c) is not excluded from this section by—
(i) subsection (5) (material completion),
(ii) subsection (7) (company without share of equity), or
(iii) subsection (8) (additionally-developed oil fields).
In the following provisions of this section, expenditure to which this section applies is referred to as “relevant expenditure”.
(2) Relevant expenditure incurred by a company on any day (“the relevant day”) is not relievable expenditure for the purposes of section 332C except—
(a) if immediately before the relevant day the cumulative total of relevant expenditure attributable to the company's share of the equity in the oil field (see subsection (3)) exceeds the relevant field threshold (see subsection (4)), or
(b) to the extent that, in a case not within paragraph (a), the amount of relevant expenditure incurred on the relevant day, when added to that cumulative total, exceeds the relevant field threshold.
(3) The “cumulative total of relevant expenditure attributable to the company's share of the equity in the oil field” at any time is the total amount of relevant expenditure which is incurred by the company during the period beginning with the start date and ending with that time, but this is subject to sections 332IA(3) and 332IB(4) (which relate to the disposal and acquisition of equity in an oil field).
In this subsection “the start date” means 1 April 2015 or, if later, the authorisation day (within the meaning of Chapter 7) for the field.
(4) The “relevant field threshold” is an amount given by the formula—
160
%
×
F
×
E
where—
F is the total field allowance for the oil field, as originally determined under section 356 for the purposes of Chapter 7;
E is the company's share of the equity in the oil field at the end of the relevant day.
(5) This section does not apply to expenditure which is incurred on or after the day determined by the relevant national authority as that on which the relevant project was materially completed.
(5A) The relevant national authority” is—
(a) where the relevant project relates to a field that is wholly within the Welsh onshore area (as defined in section 8A of the Petroleum Act 1998), the Welsh Ministers;
(b) otherwise, the OGA.
(6) “The relevant project” means—
(a) in a case that fell within section 351(1)(a), the development described in the field development plan for the field, and
(b) in a case that fell within section 351(1)(b) or (c), the programme of development for the field.
(7) This section does not apply to expenditure incurred by a company if—
(a) at the time when the expenditure is incurred, the company is not a licensee in the oil field, and
(b) the expenditure is incurred in making an asset available in a way which gives rise to tariff receipts (as defined by section 15(3) of the Oil Taxation Act 1983) or tax-exempt tariffing receipts (as defined by section 6A(2) of that Act).
(8) This section does not apply to expenditure to which section 332DB applies.
332DB Restriction where project in additionally-developed field qualified for field allowance
(1) This section applies to expenditure which—
(a) is incurred by a company in relation to a project by reference to which an oil field was immediately before 1 April 2015 an additionally-developed oil field for the purposes of Chapter 7,
(b) would in the absence of this section be relievable under section 332C, and
(c) is not excluded from this section by subsection (5) (material completion) or subsection (6) (company without share of project-related reserves).
In the following provisions of this section, expenditure to which this section applies is referred to as “relevant expenditure”.
(2) Relevant expenditure incurred by a company in relation to a project on any day (“the relevant day”) is not relievable expenditure for the purposes of section 332C except—
(a) if immediately before the relevant day the cumulative total of relevant expenditure attributable to the company's share of project-related reserves (see subsection (3)) exceeds the relevant project threshold (see subsection (4)), or
(b) to the extent that, in a case not within paragraph (a), the amount of relevant expenditure incurred on the relevant day, when added to that cumulative total, exceeds the relevant project threshold.
(3) The “cumulative total of relevant expenditure attributable to the company's share of project-related reserves” at any time is the total amount of relevant expenditure which is incurred by the company during the period beginning with 1 April 2015 and ending with that time, but this is subject to sections 332IA(5) and 332IB(6) (which relate to the disposal and acquisition of shares in project-related reserves).
(4) The “relevant project threshold” is an amount given by the formula—
160
%
×
F
×
E
where—
F is the total field allowance for the oil field in relation to the project, as originally determined under section 356A for the purposes of Chapter 7;
E is the company's share of project-related reserves at the end of the relevant day.
(5) This section does not apply to expenditure which is incurred on or after the day determined by the OGA as that on which the project was materially completed.
(6) This section does not apply to expenditure incurred by a company if—
(a) the company does not, at the time when the expenditure is incurred, hold a share of project-related reserves, and
(b) the expenditure is incurred in making an asset available in a way which gives rise to tariff receipts (as defined by section 15(3) of the Oil Taxation Act 1983) or tax-exempt tariffing receipts (as defined by section 6A(2) of that Act).
(7) In this section “project-related reserves”, in relation to a project and an oil field, means the additional reserves of oil that the oil field has as a result of the project.
332DC Restriction relating to fields qualifying for onshore allowance
(1) This section applies to investment expenditure which is incurred—
(a) for the purposes of onshore oil-related activities in respect of an oil field which is a qualifying site within the meaning of section 356C (generation of onshore allowance), and
(b) on a day at the beginning of which neither of the disqualifying conditions in section 356CA (disqualifying conditions for section 356C(4)(b)) is met.
(2) Expenditure to which this section applies is not relievable expenditure for the purposes of section 332C.
(3) In this section “onshore oil-related activities” has the same meaning as in Chapter 8 (see section 356BA).
(1) A company's adjusted ring fence profits for an accounting period are to be reduced by the cumulative total amount of activated allowance for the accounting period (but are not to be reduced below zero).
(2) In relation to a company and an accounting period, the “cumulative total amount of activated allowance” is—
A + C
where—
A is the total of any amounts of activated allowance the company has, for any qualifying oil fields, for the accounting period (see section 332F(2)) or for reference periods within the accounting period (see section 332H(1)), and
C is any amount carried forward to the period under section 332EA.
(1) This section applies where, in the case of a company and an accounting period, the cumulative total amount of activated allowance (see section 332E(2)) is greater than the adjusted ring fence profits.
(2) The difference is carried forward to the next accounting period.
332F Activation of allowance: no change of equity share
(1) This section applies where—
(a) for the whole or part of an accounting period, a company is a licensee in a qualifying oil field,
(b) the accounting period is not divided into reference periods (see section 332G),
(c) the company holds, for the accounting period and the qualifying oil field, a closing balance of unactivated allowance (see section 332FA) which is greater than zero, and
(d) the company has relevant income from the qualifying oil field for the accounting period.
(2) The amount of activated allowance the company has for that accounting period and that qualifying oil field is the smallest of—
(a) the closing balance of unactivated allowance held for the accounting period and the oil field;
(b) the total amount of the company's relevant income from that oil field for that accounting period;
(c) in a case where section 332FB applies, the relevant activation limit for the accounting period and the oil field (see subsection (2) of that section).
(3) For the purposes of this Chapter, income is relevant income of a company from a qualifying oil field for an accounting period if it is—
(a) production income of the company from any oil extraction activities carried on in that oil field that is taken into account in calculating the company's adjusted ring fence profits for the accounting period, or
(b) income that—
(i) is income of such description (whether or not relating to the oil field) as may be prescribed by the Treasury by regulations, and
(ii) is taken into account as mentioned in paragraph (a).
(4) The Treasury may by regulations make such amendments of this Chapter as the Treasury consider appropriate in consequence of, or in connection with, any provision contained in regulations under subsection (3)(b).
(5) Regulations under subsection (3)(b) or (4) may provide for any of the provisions of the regulations to have effect in relation to accounting periods ending before (or current when) the regulations are made.
(6) But subsection (5) does not apply to—
(a) any provision of amending or revoking regulations under subsection (3)(b) which has the effect that income of any description is to cease to be treated as relevant income of a company from a qualifying oil field for an accounting period, or
(b) provision made under subsection (4) in consequence of or in connection with provision within paragraph (a).
(7) Regulations under this section may make transitional provision or savings.
(8) Regulations under this section may not be made unless a draft of the instrument containing them has been laid before, and approved by a resolution of, the House of Commons.
(9) Where a tariff receipt of the company relates only partly to the oil field mentioned in subsection (1), for the purposes of subsection (3)(b) the tariff receipt is to be attributed to the oil field on a just and reasonable basis.
(10) If the company has entered into any arrangements the purpose, or one of the main purposes of which is—
(a) to cause income to fall within subsection (3)(b), or
(b) to advance the time at which any income falls within that provision,
any income arising in connection with the arrangement is not regarded as a tariff receipt for the purposes of subsection (3)(b).
(11) In subsection (10) “arrangement” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).
332FA The closing balance of unactivated allowance for an accounting period
The closing balance of unactivated allowance held by a company for an accounting period and a qualifying oil field is—
P + Q
where—
P is the amount of investment allowance generated by the company in the qualifying oil field in the accounting period (including any amount treated under section 332IB(1) as generated by the company in that field in that accounting period);
Q is any amount carried forward from an immediately preceding accounting period under section 332FC(1) or from an immediately preceding reference period under section 332HB(1).
332FB Activation limit for former additionally-developed fields
(1) This section applies to a company for an accounting period in relation to an oil field if—
(a) immediately before 1 April 2015 the oil field was an additionally-developed oil field for the purposes of Chapter 7 as a result of a project that fell within section 349A(1), and
(b) the project is not an excluded project (see subsection (3)).
(2) For the purposes of section 332F(2)(c), the “relevant activation limit” for the accounting period and the oil field is the amount that would be the closing balance of unactivated allowance held by the company for the accounting period if paragraph 7(3) of Schedule 12 to FA 2015 (conversion of unactivated field allowance) had never applied to any allowance attributable to the project.
(3) The project is an “excluded” project if condition A or condition B is met.
(4) Condition A is that—
(a) a substantial amount of work has been done in relation to the project, and
(b) the accounting period begins on or after the first day of the year of expected first production for the project.
(5) The “year of expected first production” for the project is the year that was notified to the Secretary of State, on or before the day on which the project was authorised by the Secretary of State, as the calendar year in which additional reserves of oil were expected to be first won from the field as a result of the project.
(6) Condition B is that the accounting period begins on or after the day determined under section 332DB(5) as that on which the project was materially completed.
(1) If, in the case of an accounting period of a company and a qualifying oil field, the amount given by subsection (2) is greater than zero, that amount is treated as investment allowance held by the company for that oil field for the next period (and is treated as held with effect from the beginning of that period).
(2) The amount is—
U − A − T
where—
U is the closing balance of unactivated allowance held for the accounting period and the qualifying oil field (see section 332FA);
A is the amount of activated allowance that the company has for the accounting period and the qualifying oil field (see section 332F(2));
T is any amount that is required by section 332IA(1) (reduction of allowance if equity disposed of) to be deducted in connection with a disposal or disposals made on the day following the end of the accounting period.
(3) If the accounting period is followed by a reference period of the company belonging to that qualifying oil field (see section 332G), “the next period” means that period.
(4) If subsection (3) does not apply “the next period” means the next accounting period of the company.
(1) This section applies where—
(a) a company is a licensee in a qualifying oil field for the whole or part of an accounting period, and
(b) the company has different shares of the equity in the field on different days in the accounting period.
(2) For the purposes of this Chapter, the accounting period is to be divided into as many consecutive periods (called “reference periods”) as are necessary to secure that—
(a) a reference period begins with the first day of the accounting period,
(b) a reference period begins with the date of each disposal or acquisition of a share of the equity in the qualifying oil field that is made by the company in that accounting period (not including acquisitions or disposals made on the first day of the accounting period), and
(c) a reference period ends with the last day of the accounting period.
(3) Each such reference period “belongs to” the qualifying oil field concerned.
(1) The amount (if any) of activated allowance that a company has for a qualifying oil field for a reference period is the smallest of the following—
(a) the total amount of unactivated allowance that is attributable to the reference period and the oil field (see section 332HA);
(b) the company's relevant income from the oil field for the reference period (see subsection (2));
(c) in a case where section 332FB (activation limit applying in case of certain fields) applies, the relevant activation limit for the reference period and the oil field (see subsection (3)).
(2) The company's relevant income from the oil field for the reference period is so much of the company's relevant income from the oil field for the accounting period (see section 332F(3)) as arises in the reference period.
(3) If section 332FB (activation limit applying in case of certain fields) applies in relation to the oil field for the accounting period in which the reference period falls, the “relevant activation limit” for the reference period and the oil field is the amount that would be the total amount of unactivated allowance attributable to the reference period and the oil field if paragraph 7(3) of Schedule 12 to FA 2015 (conversion of unactivated field allowance) had never applied to any allowance attributable to the project in question.
332HA Unactivated amounts attributable to a reference period
(1) For the purposes of section 332H(1)(a), the total amount of unactivated allowance attributable to a reference period and a qualifying oil field is—
P + Q
where—
P is the amount of allowance generated by the company in the reference period in the oil field (including any amount treated under section 332IB(1) as generated by the company in that oil field in that reference period);
Q is the amount given by subsection (2) or (3).
(2) Where the reference period is not immediately preceded by another reference period but is preceded by an accounting period of the company, Q is equal to the amount (if any) that is to be carried forward from that preceding accounting period under section 332FC(1).
(3) Where the reference period is immediately preceded by another reference period, Q is equal to the amount (if any) carried forward under section 332HB(1).
332HB Carry-forward of unactivated allowance from a reference period
(1) If, in the case of a reference period (“RP1”) of a company, the amount given by subsection (2) is greater than zero, that amount is treated as investment allowance held by the company for the qualifying oil field for the next period (and is treated as held with effect from the beginning of that period).
(2) The amount is—
U − A − T
where—
U is the total amount of unactivated allowance attributable to the reference period and the qualifying oil field (see section 332HA(1));
A is the amount of activated allowance that the company has for the qualifying oil field for the reference period (see section 332H(1));
T is any amount that is required by section 332IA(1) (reduction of allowance if equity disposed of) to be deducted in connection with a disposal or disposals made on the day following the end of the reference period.
(3) If RP1 is immediately followed by another reference period of the company (belonging to the same qualifying oil field), “the next period” means that reference period.
(4) If subsection (3) does not apply, “the next period” means the next accounting period of the company.
(1) Sections 332IA and 332IB apply where—
(a) a company (“the transferor”) disposes of the whole or part of its share of the equity in a qualifying oil field, and
(b) one or more of the following conditions is met.
(2) The “unactivated allowance condition” is that immediately before the disposal the transferor holds unactivated investment allowance for the oil field.
(3) The “section 332DA expenditure condition” is that—
(a) immediately before the disposal the company has for the purposes of section 332DA (restriction where field qualified for field allowance as new field) a cumulative total of relevant expenditure attributable to its share of the equity in the oil field, and
(b) the date of the disposal falls before any date determined under section 332DA(5) (material completion).
(4) The “section 332DB expenditure condition” is that—
(a) immediately before the disposal the company has for the purposes of section 332DB (restriction where project in additionally-developed field qualified for field allowance) a cumulative total of relevant expenditure attributable to its share of project-related reserves in relation to the oil field, and
(b) the date of the disposal falls before any date determined under section 332DB(5) (material completion).
(5) In sections 332IA and 332IB—
(a) each of the companies to which a share of the equity is disposed of is referred to as “a transferee”, and
(b) references to conditions are to be read in accordance with this section.
332IA Reduction of allowance if equity is disposed of
(1) If the unactivated allowance condition is met, the following amount is to be deducted in calculating the total amount of unactivated investment allowance attributable to the qualifying oil field concerned that is to be carried forward under section 332FC or 332HB from an accounting period or reference period of the transferor—
( U − A ) × ( E1 − E2 ) E1
where—
U and A are—
in the case of a disposal made on the day following the end of an accounting period, the same as in section 332FC(2) (in its application to that period), or
in the case of a disposal made on the day following the end of a reference period, the same as in section 332HB(2) (in its application to that period);
E1 is the transferor's share of the equity in the qualifying oil field immediately before the disposal;
E2 is the transferor's share of the equity in the qualifying oil field immediately after the disposal.
(2) Subsection (3) applies if the section 332DA expenditure condition is met.
(3) As from the beginning of the accounting period or reference period that begins with the day on which the disposal is made, the following amount is to be deducted in calculating for the purposes of section 332DA the cumulative total of relevant expenditure attributable to the transferor's share of the equity in the oil field—
X × ( E1 − E2 ) E1
where—
X is the cumulative total of relevant expenditure attributable to the transferor's share of the equity in the oil field (for the purposes of section 332DA), determined immediately before the disposal;
E1 and E2 have the same meaning as in subsection (1).
(4) Subsection (5) applies if the section 332DB expenditure condition is met.
(5) As from the beginning of the accounting period or reference period that begins with the day on which the disposal is made, the following amount is to be deducted in calculating for the purposes of section 332DB the cumulative total of relevant expenditure attributable to the transferor's share of project-related reserves—
X × ( E1 − E2 ) E1
where—
X is the cumulative total of relevant expenditure attributable to the transferor's share of project-related reserves (for the purposes of section 332DB), determined immediately before the disposal;
E1 is the transferor's share, immediately before the disposal, of the additional reserves of oil that the oil field has as a result of the project;
E2 is the transferor's share, immediately after the disposal, of the additional reserves of oil that the oil field has as a result of the project.
(1) If the unactivated allowance condition is met, a transferee is treated as generating in the qualifying oil field concerned, at the beginning of the reference period or accounting period of the transferee that begins with the day on which the disposal is made, investment allowance of the amount given by subsection (2).
(2) The amount is—
R × E3 E1 − E2
where—
R is the amount determined for the purposes of the deduction under section 332IA(1);
E3 is the share of the equity in the qualifying oil field that the transferee has acquired from the transferor;
E1 and E2 are the same as in section 332IA(1).
(3) Subsection (4) applies if the section 332DA expenditure condition is met.
(4) A transferee is treated for the purposes of section 332DA(3) as having incurred in respect of the qualifying oil field, at the beginning of the reference period or accounting period of the transferee that begins with the day on which the disposal is made, expenditure of the following amount—
R × E3 ( E1 − E2 )
where—
R is the amount determined for the purposes of the deduction under section 332IA(3);
E1, E2 and E3 have the same meaning as in subsection (2).
(5) Subsection (6) applies if the section 332DB expenditure condition is met.
(6) A transferee is treated for the purposes of section 332DB(3) as having incurred in respect of the project, at the beginning of the reference period or accounting period of the transferee that begins with the day on which the disposal is made, expenditure of the following amount—
R × E3 ( E1 − E2 )
where—
R is the amount determined for the purposes of the deduction under section 332IA(5);
E3 is the share of the project-related reserves that the transferee has acquired from the transferor;
E1 and E2 have the same meaning as in section 332IA(5).
(7) In subsection (6) “project-related reserves” means the additional reserves of oil that the oil field has as a result of the project.
(1) This section applies if there is any alteration in a company's adjusted ring fence profits for an accounting period after this Chapter has effect in relation to the profits.
(2) Any necessary adjustments to the operation of this Chapter (whether in relation to the profits or otherwise) are to be made (including any necessary adjustments to the effect of section 332E on the profits or to the calculation of the amount to be carried forward under section 332EA).
(1) The Treasury may by regulations substitute a different percentage for the percentage that is at any time specified in any of the following provisions—
(a) section 332C(2) (calculation of allowance as a percentage of investment expenditure);
(b) section 332DA(4) (calculation of relevant field threshold in relation to former new field);
(c) section 332DB(4) (calculation of relevant project threshold in relation to former additionally-developed field).
(2) Regulations under subsection (1) may include transitional provision.
(1) Section 5 of CAA 2001 (when capital expenditure is incurred) applies for the purposes of this Chapter as for the purposes of that Act.
(2) Regulations under section 332BA(1)(b) may make provision about when any expenditure that is investment expenditure as a result of the regulations is to be treated for the purposes of this Chapter as incurred.
(3) This section is subject to section 332CA(3).
In this Chapter (except where otherwise specified)—
“adjusted ring fence profits”, in relation to a company and an accounting period, is to be read in accordance with section 330ZA;
“cumulative total amount of activated allowance” has the meaning given by section 332E(2);
“investment allowance” has the meaning given by section 332C(2);
“licence” has the same meaning as in Part 1 of OTA 1975 (see section 12(1) of that Act);
“licensee” has the same meaning as in Part 1 of OTA 1975;
“relevant income”, in relation to a qualifying oil field and an accounting period, has the meaning given by section 332F(3).
This Chapter sets out how relief for certain capital expenditure incurred for the purposes of onshore oil-related activities is given by way of reduction of a company's adjusted ring fence profits, and includes provision about—
(a) the need for allowance held for a site to be activated by relevant income from the same site in order for the allowance to be available for reducing adjusted ring fence profits,
(b) elections by a company to transfer allowance between different sites in which it is a licensee (see section 356F), and
(c) mandatory transfers of allowance where shares in the equity in a licensed area are disposed of (see sections 356H to 356HB and the related provisions in sections 356G to 356GD).
(1) In this Chapter “onshore oil-related activities” means activities of a company which are carried on onshore and—
(a) fall within any of subsections (1) to (4) of section 356BB, or
(b) consist of the acquisition, enjoyment or exploitation of oil rights.
(2) Activities of a company are carried on “onshore” if they are authorised—
(a) under a landward licence under Part 1 of the Petroleum Act 1998 or the Petroleum (Production) Act 1934, or
(b) under a licence under the Petroleum (Production) Act (Northern Ireland) 1964.
(3) In subsection (2)(a) “landward licence” means a licence in respect of an area which falls within the definition of “landward area” in the regulations pursuant to which the licence was applied for.
(1) Activities of a company in searching for oil or causing such searching to be carried out for the company.
(2) Activities of a company in extracting oil, or causing oil to be extracted for it, under rights which—
(a) authorise the extraction, and
(b) are held by it or by a company associated with it.
(3) Activities of a company in transporting, or causing to be transported for it, oil extracted under rights which—
(a) authorise the extraction, and
(b) are held as mentioned in subsection (2)(b),
but only if the transportation meets the condition in subsection (5).
(4) Activities of the company in effecting, or causing to be effected for it, the initial treatment or initial storage of oil won from any site under rights which—
(a) authorise its extraction, and
(b) are held as mentioned in subsection (2)(b).
(5) The condition mentioned in subsection (3) is that the transportation is to a place at which the seller in a sale at arm's length could reasonably be expected to deliver it (or, if there is more than one such place, the one nearest to the place of extraction).
(6) In this section “initial storage”—
(a) means, in relation to oil won from a site, the storage of a quantity of oil won from the site not exceeding 10 times the relevant share of the maximum daily production rate of oil for the site as planned or achieved (whichever is greater), but
(b) does not include the matters excluded by paragraphs (a) to (c) of the definition of “initial storage” in section 12(1) of OTA 1975;
and in this subsection “the relevant share” means a share proportionate to the company's share of oil won from the site concerned.
(7) In this section “initial treatment” has the meaning given by section 12(1) of OTA 1975; but for this purpose that definition is to be read as if the references in it to an oil field were to a site.
In this Chapter “site” (except in the expression “drilling and extraction site”) means—
(a) a drilling and extraction site that is not used in connection with any oil field, or
(b) an oil field (whether or not one or more drilling and extraction sites are used in connection with it).
(1) Subsection (2) applies where a company incurs any relievable capital expenditure in relation to a qualifying site.
(2) The company is to hold an amount of allowance equal to 75% of the amount of the expenditure.
(3) “Qualifying site” means a site whose development (in whole or in part) is authorised for the first time on or after 5 December 2013.
(4) Capital expenditure incurred by a company is “relievable” only if, and so far as—
(a) it is incurred for the purposes of onshore oil-related activities (see section 356BA), and
(b) neither of the disqualifying conditions is met at the beginning of the day on which the expenditure is incurred (see section 356CA).
(4A) Subsections (1) to (4) are subject to section 356CAA (which prevents expenditure on the acquisition of an asset from being relievable in certain circumstances).
(5) Allowance held under this Chapter is called “onshore allowance”.
(6) Onshore allowance is said in this Chapter to be “generated” at the time when the capital expenditure is incurred (see section 356JA).
(7) Onshore allowance is referred to in this Chapter as being generated—
(a) “by” the company concerned,
(b) “at” the site concerned.
(8) Where capital expenditure is incurred only partly for the purposes of onshore oil-related activities, or the onshore oil-related activities for the purposes of which capital expenditure is incurred are carried on only partly in relation to a particular site, the expenditure is to be attributed to the site concerned on a just and reasonable basis.
(9) In this section, references to authorisation of development of a site—
(a) in the case of a site which is an oil field, are to be read in accordance with section 356IB;
(b) in the case of a drilling and extraction site, are to be read in accordance with section 356J.
356CA Disqualifying conditions for section 356C(4)(b)
(1) The first disqualifying condition is that production from the site is expected to exceed 7,000,000 tonnes.
(2) The second disqualifying condition is that production from the site has exceeded 7,000,000 tonnes.
(3) For the purposes of this section 1,100 cubic metres of gas at a temperature of 15 degrees celsius and pressure of one atmosphere is to be counted as equivalent to one tonne.
356CAA Expenditure on acquisition of asset: further disqualifying conditions
(1) Capital expenditure incurred by a company (“the acquiring company“) on the acquisition of an asset (“the acquisition concerned”) is not relievable capital expenditure for the purposes of section 356C if subsection (2), (3) or (8) applies to the asset.
(2) This subsection applies to the asset if capital expenditure incurred before the acquisition concerned, by the acquiring company or another company, in acquiring, bringing into existence or enhancing the value of the asset was relievable under section 356C.
(3) This subsection applies to the asset if—
(a) the asset—
(i) is the whole or part of the equity in a qualifying site, or
(ii) is acquired in connection with a transfer to the acquiring company of the whole or part of the equity in a qualifying site,
(b) capital expenditure was incurred before the acquisition concerned, by the acquiring company or another company, in acquiring, bringing into existence or enhancing the value of the asset, and
(c) any of that expenditure—
(i) related to the qualifying site, and
(ii) would have been relievable under section 356C if this Chapter had been fully in force and had applied to expenditure incurred at that time.
(4) For the purposes of subsection (3)(a)(ii) it does not matter whether the asset is acquired at the time of the transfer.
(5) In subsection (3)(c) “this Chapter” means the provisions of this Chapter as those provisions have effect at the time when the capital expenditure mentioned in subsection (1) is incurred.
(6) The reference in subsection (3)(c)(i) to the qualifying site includes an area that, although not a qualifying site when the expenditure mentioned in subsection (3)(b) was incurred, subsequently became the qualifying site.
(7) Where expenditure mentioned in subsection (3)(b) related to an area which subsequently became the qualifying site, the following sub-paragraph is to be treated as substituted for subsection (3)(c)(ii)—
(ii) would have been relievable under section 356C if the area in question had been a qualifying site when the expenditure was incurred, or if the area in question had been such a site at that time and this Chapter had been fully in force and had applied to expenditure incurred at that time.
(8) This subsection applies to the asset if—
(a) capital expenditure mentioned in subsection (1) would, in the absence of this section, be relievable under section 356C by reason of an election under section 356CB (treatment of expenditure not related to an established site), and
(b) capital expenditure which was incurred before the acquisition concerned, by the acquiring company or another company, in acquiring, bringing into existence or enhancing the value of the asset, either—
(i) has become relievable under section 356C by reason of an election under section 356CB, or
(ii) would be so relievable if such an election were made in respect of that expenditure.
(9) In determining for the purposes of subsection (8)(b) whether particular expenditure was incurred “before” the acquisition concerned—
(a) paragraph (b) of section 356CB(6) is to be ignored, and
(b) accordingly, that expenditure is to be taken (for the purposes of determining whether it was incurred before the acquistion concerned) to have been incurred when it was actually incurred.
(10) For the purposes of subsection (8)(b)(ii) it does not matter if an election is not in fact capable of being made.
356CB Expenditure not related to an established site
(1) A company may make an election under this section in relation to capital expenditure incurred by it for the purposes of onshore oil-related activities if the appropriate condition is met.
(2) The appropriate condition is that at the time of the election no site can be identified as a site in relation to which the expenditure has been incurred.
(3) An election may not be made before the beginning of the third accounting period of the company after that in which the expenditure is incurred.
(4) An election must specify—
(a) the expenditure in question,
(b) a site (“the specified site”) every part of which is, or is part of, an area in which the company is a licensee, and
(c) an accounting period of the company (“the specified accounting period”).
(5) The specified accounting period must not be earlier than the accounting period in which the election is made.
(6) Where a company makes an election under this section in relation to an amount of expenditure, that amount is treated for the purposes of this Chapter as incurred by the company—
(a) in relation to the specified site, and
(b) at the beginning of the specified accounting period.
(1) A company's adjusted ring fence profits for an accounting period are to be reduced by the cumulative total amount of activated allowance for the accounting period (but are not to be reduced below zero).
(2) In relation to a company and an accounting period, the “cumulative total amount of activated allowance” is—
A + C
where—
A is the total of any amounts of activated allowance the company has, for any sites, for the accounting period (see section 356E(2)) or for reference periods within the accounting period (see section 356GB(1)), and
C is any amount carried forward to the period under section 356DA.
(1) This section applies where, in the case of a company and an accounting period—
(a) the cumulative total amount of activated allowance (see section 356D(2)), is greater than
(b) the adjusted ring fence profits.
(2) The difference is carried forward to the next accounting period.
356E Activation of allowance: no change of equity share
(1) This section applies where—
(a) a company is a licensee in a licensed area for the whole or part (“the licensed part”) of an accounting period,
(b) the company's share of the equity in the site is the same throughout the accounting period or, as the case requires, throughout the licensed part of the accounting period,
(c) the licensed area is or contains a site,
(d) the company holds, for the accounting period and the site, a closing balance of unactivated allowance (see section 356EA) that is greater than zero, and
(e) the company has relevant income from the site for the accounting period.
(2) The amount of activated allowance the company has for that accounting period and that site is the smaller of—
(a) the closing balance of unactivated allowance held for the accounting period and the site;
(b) the company's relevant income for that accounting period from that site.
(3) In this Chapter “relevant income”, in relation to a site and an accounting period of a company, means production income of the company from any oil extraction activities carried on at the site that is taken into account in calculating the company's adjusted ring fence profits for the accounting period.
356EA The closing balance of unactivated allowance for an accounting period
The closing balance of unactivated allowance held by a company for an accounting period and a site is—
P + Q − R
where—
P is the amount of onshore allowance generated by the company in the accounting period at the site (including any amount treated under section 356F(7) or 356HB(1) as generated by the company in that accounting period at that site);
Q is any amount carried forward from an immediately preceding accounting period under section 356EB(2) or from an immediately preceding reference period under section 356GC;
R is any amount deducted in accordance with section 356GD(1) (reduction of allowance if equity disposed of).
(1) This section applies where X is greater than Y in the case of an accounting period of a company and a site, where—
X is the closing balance of unactivated allowance for the accounting period and the site;
Y is the company's relevant income for the accounting period from that site.
(2) An amount equal to the difference between X and Y is treated as onshore allowance held by the company for that site for the next accounting period (and is treated as held with effect from the beginning of that period).
(1) This section applies if a company has, with respect to a site, an amount (“N”) of onshore allowance available to carry forward to an accounting period—
(a) under section 356EB(2), or
(b) by virtue of section 356GC(3).
(2) The company may elect to transfer the whole or part of that amount to another site (“site B”), if the appropriate conditions are met.
(3) The appropriate conditions are that—
(a) every part of site B is, or is part of, an area in which the company is a licensee, and
(b) the election is made no earlier than the beginning of the third accounting period of the company after that in which the allowance was generated.
(4) For the purposes of subsection (3)(b), a company may regard an amount of onshore allowance held by it for a site as generated in a particular accounting period if the amount does not exceed—
A − T
where—
A is the amount of onshore allowance generated in that accounting period for that site;
T is the total amount of onshore allowance generated in that period for that site that has already been transferred under this section.
(5) An election must specify—
(a) the amount of onshore allowance to be transferred;
(b) the site at which it was generated;
(c) the site to which it is transferred;
(d) the accounting period in which it was generated.
(6) Where a company makes an election under subsection (2), then—
(a) if the company elects to transfer the whole of N, no amount is available to be carried forward under section 356EB(2) or (as the case may be) by virtue of section 356GC(3);
(b) if the company elects to transfer only part of N, the amount available to be carried forward as mentioned in subsection (1) is reduced by the amount transferred.
(7) Where an amount of onshore allowance is transferred to a site as a result of an election, this Chapter has effect as if the allowance is generated at that site at the beginning of the accounting period in which the election is made.
(1) Sections 356GA to 356GD apply to a company in respect of an accounting period and a licensed area that is or contains a site, if the following conditions are met—
(a) the company is a licensee in the licensed area for the whole, or for part, of the accounting period;
(b) the company has different shares (greater than zero) of the equity in the licensed area at different times during the accounting period.
(2) In a case where a company has three or more different shares of the equity in a licensed area during a particular day, sections 356GA to 356GD (in particular, provisions relating to the beginning or end of a day) have effect subject to the necessary modifications.
(1) For the purposes of sections 356GB to 356GD, the accounting period, or (if the company is not a licensee for the whole of the accounting period) the part or parts of the accounting period for which the company is a licensee, are to be divided into reference periods (each of which “belongs to” the site concerned).
(2) A reference period is a period of consecutive days that meets the following conditions—
(a) at the beginning of each day in the period, the company is a licensee in the licensed area;
(b) at the beginning of each day in the period, the company's share of the equity in the licensed area is the same;
(c) each day in the period falls within the accounting period.
(1) The amount (if any) of activated allowance that a company has with respect to a site for a reference period is the smaller of the following—
(a) the company's relevant income from the site in the reference period;
(b) the total amount of unactivated allowance that is attributable to the reference period and the site (see section 356GD).
(2) The company's relevant income from the site in the reference period is—
I × R L
where—
I is the company's relevant income from the site in the whole of the accounting period;
R is the number of days in the reference period;
L is the number of days in the accounting period for which the company is a licensee in the licensed area concerned.
356GC Carry-forward of unactivated allowance from a reference period
(1) If, in the case of a reference period (“RP1”) of a company, the amount mentioned in subsection (1)(b) of section 356GB exceeds the amount mentioned in subsection (1)(a) of that section, an amount equal to the difference between those amounts is treated as onshore allowance held by the company for the site concerned for the next period.
(2) If RP1 is immediately followed by another reference period of the company (belonging to the same site), “the next period” means that reference period.
(3) If subsection (2) does not apply, “the next period” means the next accounting period of the company.
356GD Unactivated amounts attributable to a reference period
(1) For the purposes of section 356GB(1)(b), the total amount of unactivated allowance attributable to a reference period and a site is—
P + Q − R
where—
P is the amount of allowance generated by the company in the reference period at the site (including any amount treated under section 356F(7) or 356HB(1) as generated by the company in that accounting period at that site);
Q is the amount given by subsection (2) or (3);
R is any amount to be deducted under section 356HA(1) in respect of a disposal of the whole or part of the company's share of the equity in a licensed area that is or contains the site.
(2) Where the reference period is not immediately preceded by another reference period but is preceded by an accounting period of the company, Q is equal to the amount (if any) that is to be carried forward from that preceding accounting period under section 356EB(2).
(3) Where the reference period is immediately preceded by another reference period, Q is equal to the amount carried forward by virtue of section 356GC(2).