(1)The Oil Taxation Act 1975 shall be amended as follows.
(2)In the definition of “initial treatment” in section 12(1) for paragraph (b) there shall be substituted—
separating oil so won and consisting of gas from other oil so won; or
separating oil so won and consisting of gas of a kind that is transported and sold in normal commercial practice from other oil so won and consisting of gas; or
liquifying oil so won and consisting of gas of such a kind as aforesaid for the purpose of transporting it; or
subjecting oil so won to any process of which the purpose is to secure that oil disposed of crude has the quality that is normal for oil so disposed of from the field,”.
(3)In paragraph (i) of that definition for the words “paragraph (a) or (b) of this definition” there shall be substituted the words “ any of paragraphs (a) to (e) of this definition ”.
(4)For paragraph (ii) of that definition there shall be substituted—
any activity carried on as part of, or in association with, the refining of oil not consisting of gas or any activity the sole or main purpose of which is to achieve a chemical reaction in respect of oil consisting of gas; or”.
(5)After the definition of “production purposes” in section 12(1) there shall be inserted—
““refining”, in relation to oil, does not include subjecting it to initial treatment and “refined” and “refinery” shall be construed accordingly;”.
(6)In paragraph 2 of Schedule 3 (definition of market value of oil) after sub-paragraph (3) there shall be inserted—
“(3A)Where all or any of the oil whose market value falls to be ascertained in accordance with sub-paragraphs (1) and (2) above has been subjected to initial treatment before being disposed of or relevantly appropriated, the appropriate initial treatment referred to in sub-paragraph (2)(a) above shall, as respects that oil, include the whole of that treatment.”
(7)After the said paragraph 2 there shall be inserted—
“2A(1)Paragraph 2 above shall have effect in accordance with this paragraph where the oil whose market value falls to be ascertained at any time in accordance with sub-paragraphs (1) and (2) of that paragraph, or in accordance with those sub-paragraphs as modified by sub-paragraph (3) of that paragraph, consists of or includes gas.
(2)Sub-paragraph (2)(a) of paragraph 2 above shall not apply to so much of the oil as consists of gas unless—
(a)it has been subjected to initial treatment before being disposed of or relevantly appropriated; or
(b)it has, after being disposed of or relevantly appropriated, been subjected to initial treatment by or on behalf of the participator in question or by or on behalf of a person who is connected with him within the meaning of section 533 of the Taxes Act;
and where oil consisting of gas has, whether before or after being disposed of or relevantly appropriated, been subjected to initial treatment by or on behalf of the participator in question or by or on behalf of a person who is connected with him as aforesaid the appropriate initial treatment referred to in sub-paragraph (2)(a) of paragraph 2 above shall include the treatment to which it has been so subjected.
(3)Where the initial treatment mentioned in sub-paragraph (2) above includes treatment in order to separate gas of one or more kinds which are transported and sold in normal commercial practice, the market value of the gas of each such kind which is separated shall be ascertained in accordance with sub-paragraphs (1) and (2) of paragraph 2 as if that were the only oil whose market value fell to be ascertained at the time in question (with sub-paragraph (2)(b) of paragraph 2 applying accordingly.)
(4)Where the oil consists of or includes natural gas within the meaning of the Energy Act 1976, it shall be assumed for the purposes of paragraph 2—
(a)that any consent given under section 8 or 9 of that Act for the supply or use of the gas applies to the supply of the gas under the contract mentioned in sub-paragraph (2) of that paragraph and to the use of the gas supplied under it; and
(b)that no consent is required under those sections for that supply or use if no such consent would be required if that contract were in fact made by the participator in question.”
(8)Subject to the following provisions of this section, this section has effect—
(a)as respects Part I of the Oil Taxation Act 1975, in relation to chargeable periods (within the meaning of that Part) ending after 31st December 1979; and
(b)as respects [F1Chapter V of Part XII of the Taxes Act 1988], in relation to chargeable periods (within the meaning of that Part) ending after that date.
(9)Expenditure shall not by virtue of this section be allowable under section 3 of the said Act of 1975 unless it was incurred after the said 31st December or would have been allowable under section 4 of that Act but for the proviso to subsection (1) of that section.
(10)For the purposes of section 4 of the said Act of 1975 expenditure incurred in acquiring, bringing into existence or enhancing the value of an asset which before the passing of this Act was used for the purpose of any process which, if this Act had been in force, would by virtue of this section have constituted initial treatment of oil won from an oil field shall be treated as having been incurred on the date when the asset was first so used; and for the purposes of that section (but not of the foregoing provisions of this subsection) the use of the asset in connection with the field shall be treated as having begun—
(a)on 1st January 1980; or
(b)the date on which the asset was first used for that purpose,
whichever is the later.
Subsection (13) of the said section 4 shall apply for the purposes of this subsection.
(11). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F2
Textual Amendments
F2S. 109(11) repealed by Income and Corporation Taxes Act 1988 (c. 1, SIF 63:1), s. 844 and Sch. 31.
Modifications etc. (not altering text)
C1Part of the text of s. 109(2)(4)–(7) is in the form in which it was originally enacted: it was not reproduced in Statutes in Force and does not reflect any amendments or repeals which may have been made prior to 1.2.1991