Finance Act 1986

109 Alternative valuation of light gases.U.K.

(1)Where an election is made under this section [F1before 1st January 1994] and accepted by the Board, the market value for the purposes of the Oil Taxation Acts of any light gases to which the election applies shall be determined, not in accordance with paragraphs 2, 2A and 3 of Schedule 3 to the principal Act (value under a notional contract), but by reference to a price formula specified in the election; and, in relation to any such light gases, any reference to market value in any other provision of the Oil Taxation Acts shall be construed accordingly.

(2)No election may be made under this section in respect of light gases which are “ethane” as defined in subsection (6)(a) of section 134 of the M1Finance Act 1982 (alternative valuation of ethane used for petrochemical purposes) if the principal purpose for which the gases are being or are to be used is that specified in subsection (2)(b) of the said section 134 (use for petrochemical purposes).

(3)Subject to subsection (4) below, an election under this section applies only to light gases—

(a)which, during the period covered by the election, are either disposed of otherwise than in sales at arm’s length or relevantly appropriated; and

(b)which are not subject to fractionation between the time at which they are so disposed of or appropriated and the time at which they are applied or used for the purposes specified in the election.

(4)In any case where,—

(a)at a time during the period covered by an election, a market value falls to be determined for light gases to which subsection (4)(b) or (5)(d) of section 2 of the principal Act applies (oil stocks at the end of chargeable periods), and

(b)after the expiry of the chargeable period in question, the light gases are disposed of or appropriated as mentioned in subsection (3) above,

the market value of those light gases at the time referred to in paragraph (a) above shall be determined as if they were gases to which the election applies.

(5)Schedule 18 to the M2Finance Act 1982 (which applies to elections under section 134 of that Act relating to ethane used or to be used for petrochemical purposes) shall have effect for supplementing this section but subject to the modifications in Schedule 21 to this Act (in which “the 1982 Schedule” means the said Schedule 18).

(6)This section shall be construed as one with Part I of the principal Act and in this section—

(a)“light gases” means oil consisting of gas of which the largest component by volume over any chargeable period is methane or ethane or a combination of those gases and which—

(i)results from the fractionation of gas before it is disposed of or appropriated as mentioned in subsection (3)(a) above, or

(ii)before being so disposed of or appropriated, is not subjected to initial treatment or is subjected to initial treatment which does not include fractionation;

(b)“the principal Act” means the M3Oil Taxation Act 1975; and

(c)“the Oil Taxation Acts” means Part I of the principal Act and any enactment which is to be construed as one with that Part.

(7)In this section “fractionation” means the treatment of gas in order to separate gas of one or more kinds as mentioned in paragraph 2A(3) of Schedule 3 to the principal Act; and for the purposes of subsection (6)(a) above,—

(a)the proportion of methane, ethane or a combination of the two in any gas shall be determined at a temperature of 15[2B]dgC and at a pressure of one atmosphere; and

(b)any component other than methane, ethane or liquified petroleum gas shall be disregarded.