Finance Act 1987

SCHEDULE 10U.K. Nomination Scheme for Disposals and Appropriation

InterpretationU.K.

1(1)In this Schedule—U.K.

• “month” means calendar month;

• “nominal volume” shall be construed in accordance with paragraph 7 below;

• “nominated price” shall be construed in accordance with paragraph 6 below;

• “nominated” means a nomination made in such manner as may be prescribed by regulations made by the Board;

• “proposed sale”, “proposed supply” and “proposed appropriations” shall be construed in accordance with paragraphs (a) to (c) of sub-paragraph (1) of paragraph 2 below;

• “proposed delivery month” shall be construed in accordance with paragraph 3 below;

• “proposed transaction” means one falling within paragraph 2(1) below;

• “regulations made by the Board” means regulations under section 61(8) of this Act; and

• “Treasury regulations” means regulations under 61(7) of this Act.

(2)For the purposes of this Schedule, a particpator’s equity production from an oil field in any month is his share of the oil won from the field which, in that month, is either delivered or relevantly appropriated, other than oil which is delivered to the Secretary of State pursuant to a notice served by him.

[F1(3)Where an amount of oil is required to be delivered to the Secretary of State pursuant to a notice served by him, any oil which is inadvertently delivered to him in excess of the amount required shall be treated for the purposes of sub-paragraph (2) above as delivered pursuant to the notice.]

Transactions which may be nominatedU.K.

2(1)The proposed transactions which may be nominated by a participator in an oil field for the purposes of this Schedule are—U.K.

(a)proposed sales at arms’s length by the participator of specified quantities of oil for delivery from that oil field; and

(b)proposed supplies by the participator (being a company) to another company which is associated with the participator of specified quantities of oil for delivery from that oil field for use for refining either by that other company or by a third company associated with the participator; and

(c)proposed relevant appropriations by the participator of specified quantities of oil won from that field; and

(d)any other proposed transactions specified for the purposes of this sub-paragraph by Treasury regulations;

and two companies are associated with each other for the purposes of paragraph (b) above if they would be so associated for the purposes of section 115(2) of the M1Finance Act 1984.

(2)Where a proposed sale is nominated before a contract of sale comes into being, any reference in this Schedule to the contract of sale is a reference to the subsequent contract for the sale of oil in accordance with the terms of the nomination; and, accordingly, if no such contract of sale comes into being, the nomination of the proposed sale shall be of no effect.

(3)A particpator may not nominate a proposed sale if—

(a)under the terms of the contract of sale as orginally entered into, the party undertaking to sell the oil is someone other than the participator; or

(b)it is of a description prescibed for the purposes of this sub-paragraph by regulations made by the board.

Period for which nomination has effectU.K.

3(1)Subject to sub-paragraph (3) below, a nomination shall have effect with respect to proposed deliveries and appropriations of oil in one month only and, accordingly, where a nomination is of a proposed sale and the contract of sale provides for the supply of oil in more than one month, the nominations shall be effective only in relation to oil proposed to be delivered in the month for which the nomination has effect.U.K.

(2)Subject to sub-paragraph (3) below, in relation to a nomination, “the proposed delivery month” means the month for which the nomination has effect in accordance with sub-paragraph (1) above.

(3)In relation to a contract of sale of a description specified in the regulations, regulations made by the Board may permit a nomination of a proposed sale for each of a number of months and, in relation to such a nomination, this Schedule shall have effect subject to such modifications as may be prescribed in the regulations.

Timing of nominationsU.K.

4(1)Subject to [F2sub-paragraphs (2) and (2A)] below, a nomination shall be effective only if it is made not later than five o’clock in the afternoon of the second business day following the date which in relation to a proposed transaction of that description, is prescribed as the transaction base date.U.K.

(2)Sub-paragraph (1) above does not apply to a nomination made on or before 16th February 1987 which specified a proposed transaction having a transaction base date earlier than 12th February 1987.

[F3(2A)Where the proposed transaction has a transaction base date later than 31st December 1993, sub-paragraph (1) above has effect with the substitution for the reference to the second business day of a reference to the first business day.]

(3)The transaction base date prescribed for a proposed sale may be a date earlier than the date on which a legally binding agreement for the sale of the oil in question comes into being but may not be later than the date on which there is an agreed price at which any oil which is to be delivered pursuant to the contract of sale will be sold.

(4)In this paragraph—

(a)“business day” has the same meaning as in the M2Bills of Exchange Act 1882;

(b)“prescribed” means perscribed by regulations made by the Board.

Content of nominationU.K.

5(1)A nomination of a proposed transaction shall not be effective unless it specifies, with respect to that transaction,—U.K.

(a)the name of the participator;

(b)[F4in the case of a proposed sale], the name of the person to whom the oil is to be [F4sold];

(c)the field from which the oil is to be delivered or relevantly appropriated;

(d)the nominated price of the oil to be supplied or relevantly appropriated;

(e)the nominal volume of that oil;

(f)the proposed delivery month;

(g)the transaction base date; and

(h)such other information as may be prescribed by the Board.

(2)A nomination shall include a declaration that it is correct and complete and, in the case of a nomination of a proposed sale which is made before the contract of sale comes into being, shall also include a declaration that, to the best of the knowledge and belief of the participator making the nomination, a contract of sale will come into being in accordance with the terms of the nomination.

(3)Where a participator fraudently or negligently furnishes any incorrect information or makes any incorrect declaration in or in connection with a nomination he shall be liable to a penalty not exceeding £50,000 or, in the case of fraud, £100,000 [F5and the nomination shall not be effective].

Nominated priceU.K.

6(1)Subject to sub-paragraph (3) below, in the case of a proposed sale, the “nominated price”, in relation to the oil which is to be delivered pursuant to the sale, is the price specified in the contract of sale (expressed as a unit price) or, as the case may be, the formula under which, in accordance with the contract, the price for that oil (as so expressed) is to be determined.U.K.

(2)Subject to sub-paragraph (3) below, in the case of a proposed supply or proposed appropriation, the “nominated price” of the oil concerned means the market value of that oil, ascertained in accordance with Schedule 3 to the principal Act and expressed as a unit price; and for the purposes of paragraph 5(d) above a statement that the nominated price of oil is its “market value” shall be sufficient.

(3)Treasury regulations may—

(a)vary the meaning of “nominated price” in relation to a proposed sale, supply or appropriation and, for that purpose, amend sub-paragraph (1) or sub-paragraph (2) above; and

(b)make provision as to the meaning of “nominated price” in relation to a proposed transaction falling within paragraph 2(1)(d) above.

Nominal volumeU.K.

7(1)Subject to sub-paragraph (3) below, in the case of a proposed sale, the nominal volume means the quantity of oil which it is proposed should be delivered under the contract of sale in the proposed delivery month.U.K.

(2)Subject to sub-paragraph (3) below, in the case of a proposed supply or proposed appropriation, the nominal volume means the quantity of oil which the participator making the nomination proposes to supply or relevantly appropriate (as the case may be) in the proposed delivery month.

(3)In the case of any proposed transaction, the nominal volume means the quantity of oil expressed in such manner as may be prescribed by regulations made by the Board.

(4)In any case where—

(a)apart from this sub-paragraph, the nominal volume in any proposed transaction would be expressed as a specific volume of oil, plus or minus a particular tolerance, and

(b)that tolerance exceeds the limits prescribed for the purposes of this Schedule by regulations made by the Board,

the nominal volume shall for those purposes be taken to be the specific volume referred to in paragraph (a) above, plus or minus the maximum tolerance permitted by the regulations.

(5)Where a nominal volume is expressed as a specific volume of oil, plus or minus a tolerance, any reference in paragraph 9 below to the maximum nominal volume or the minimum nominal volume is a reference to that specific volume of oil, plus or minus the tolerance respectively.

Revision of nominationsU.K.

8(1)Except as provided by this paragraph, a nomination may not be amended or withdrawn.U.K.

(2)If a participator who has made a nomination of a proposed sale does not, in whole or in part, fulfil his obligations under the contract of sale by the delivery of oil forming part of his equity production for the proposed delivery month, then, in accordance with regulations made by the Board, he may amend or withdraw the nomination if in his opinion—

(a)there was good commercial reasons for the failure to fulfil those obligations; or

(b)the failure was occasioned by circumstances over which neither he nor any person connected or associated with him had control.

[F6(2A)If a participator who has made a nomination of a proposed supply, proposed appropriation or a proposed transaction falling within paragraph 2(1)(d) above fails, in whole or in part, to supply, to appropriate or otherwise to complete the proposed transaction by the delivery or appropriation of oil forming part of his equity production for the proposed delivery month, then, in accordance with regulations made by the Board, he may amend or withdraw the nomination as mentioned in sub-paragraph (2B) below.

(2B)The circumstances in which, in a case falling within sub-paragraph (2A) above, a participator may amend or withdraw a nomination are,—

(a)in the case of a nomination of a proposed supply or proposed appropriation, if the participator is of the opinion that the failure referred to in that sub-paragraph was caused by circumstances over which neither he nor any person connected or associated with him had control; or

(b)in the case of a nomination of a proposed transaction falling within paragraph 2(1)(d) above, in such circumstances as may be prescribed by regulations made by the Board; or

(c)in any case where the nomination is of a proposed supply or proposed appropriation and the participator is either the field operator or the operator of a relevant system, if the participator is of the opinion that the failure referred to in sub-paragraph (2A) above was caused by action necessarily taken by him in the interests of safety or the prevention of pollution or in accordance with good oil field practice.

(2C)In relation to such a nomination as is referred to in subparagraph (2B)(c) above,—

(a)a participator is the field operator if, in relation to the field specified in the nomination, he is the person having the function of organising or supervising operations for searching or boring for or getting oil in pursuance of a licence; and

(b)the expression “relevant system” is applicable only where the oil to which the nomination relates is blended oil and is a reference to any system by which blended oil (in relation to which the field specified in the nomination is one of the originating fields) is transported, treated or stored prior to its disposal or relevant appropriation; and

(c)a participator in an oil field is an operator of a relevant system, as defined above, if he is the person charged, or principally charged, with the operation of the system;

and expressions used in paragraph (b) above have the same meaning as in section 63 of this Act.]

(3)An amendment or withdrawal of a nomination by a participator in accordance with [F6the preceding provisions of this paragraph] above shall not be effective unless the Board give notice to the participator that the amendment or withdrawal is accepted, and the Board shall not give such a notice unless they are satisfied—

(a)as to the matters mentioned in either paragraph (a) or paragraph (b) of sub-paragraph (2) above [F6or, where sub-paragraph (2B) above applies, that the failure was caused as mentioned in paragraph (a) or paragraph (c) of that sub-paragraph or that the circumstances prescribed for the purposes of paragraph (b) of that sub-paragraph exist]; and

(b)[F6except where sub-paragraph (2)(b) or sub-paragraph (2B)(a)] above applies, that the failure was not part of a scheme or arrangement the main purpose of which was the avoidance of tax.

(4)For the purposes of sub-paragraph (2)(b) [F7and sub-paragraph (2B)] above,—

(a)section [F7839] of the Taxes Act (connected persons) applies; and

(b)two companies of which one is a participator in an oil field are associated with each other if one has control over the other or both are under the control of the same person or persons;

and in paragraph (b) above “control” shall be construed in accordance with section [F7416] of the Taxes Act.

(5)Where a nomination is amended in accordance with this paragraph, the [F6provisions of this Schedule (other than this paragraph)] shall apply in relation to it subject to such modifications as may be specified in regulations made by the Board.

Effective volume for nominated transactionsU.K.

9(1)The provisions of this paragraph have effect to determine, in relation to each nominated transaction, what is the effective volume of oil.U.K.

(2)In relation to a proposed sale where the nominal volume is expressed as mentioned in paragraph 7(5) above and oil is in fact delivered under the contract of sale, the effective volume is whichever is the greater of—

(a)the minimum nominal volume; and

(b)so much of the total volume of oil actually delivered under the contract as does not exceed the maximum nominal volume.

(3)In relation to any proposed sale which does not fall within sub-paragraph (2) above, the effective volume shall be taken to be the nominal volume.

[F8(4)In relation to a proposed supply or proposed appropriation where the nominal volume is expressed as mentioned in paragraph 7(5) above and oil is in fact supplied or, as the case may be, relevantly appropriated as proposed in the nomination, the effective volume is whichever is the greater of—

(a)the minimum nominal volume; and

(b)so much of the total volume of oil supplied or relevantly appropriated as does not exceed the maximum nominal volume.

(5)in relation to a proposed supply or proposed appropriation which does not fall within sub-paragraph (4) above, the effective volume is the nominal volume.]

Aggregate effective volume for a monthU.K.

10(1)Subject to the provisions of this paragraph, for each month the aggregate effective volume of a participator’s nominated transactions is the sum of the effective volumes of all of the proposed transactions nominated by him for that month.U.K.

(2)If a participator’s aggregate effective volume for any month, as determined under sub-paragraph (1) above, would exceed his equity production for that month—

(a)his nominated transactions for that month shall be taken to be reduced by cancelling later nominations in priority to earlier ones until the cancellation of the next nominated transaction would produce an aggregate effective volume less than the participator’s equity production; and

(b)the effective volume of the latest remaining nominated transaction shall be taken to be reduced so far as necessary to secure that the aggregate effective volume is equal to the participator’s equity production.

Aggregate nominated proceeds for a monthU.K.

11(1)For each month, a participator’s aggregate nominated proceeds for the purposes of section 61 of this Act is the sum of—U.K.

(a)the proceeds of each nominated transaction falling within sub-paragraph (2) below; and

(b)[F9Subject to sub-paragraph (1A) below] the market value of any excess falling within sub-paragraph (3) below.

[F9(1A)If for any month—

(a)a participator has made a nomination of a proposed sale, and

(b)he has an excess falling within sub-paragraph (3) below,

then for that month the reference in sub-paragraph (1)(b) above to the market value of the excess shall be construed as a reference to the market value multiplied by the designated fraction for that month.]

(2)[F9Subject to [F10sub-paragraphs (2A) and (2B)] below] for each nominated transaction, the effective volume of which forms part of the participator’s aggregate effective volume for the month, as defined in paragraph 10 above, the proceeds of the transaction means the effective volume multiplied by the nominated price.

[F9(2A)In the case of a nominated transaction consisting of a proposed supply or proposed appropriation, the proceeds of the transaction shall not have the meaning assigned by sub-paragraph (2) above unless the participator satisfies the Board—

(a)that the whole of the effective volume of oil has been or is to be used for refining as mentioned in paragraph 2(1)(b) above or, as the case may be, has been or is to be relevantly appropriated; or

(b)that, in so far as any of the effective volume of oil has not been or is not to be so used or appropriated, that is occasioned by circumstances over which neither the participator nor any company associated with him, as mentioned in paragraph 2(1) above, has (or had at any material time) control;

and if the Board are not so satisfied with respect to any such nominated transaction, the proceeds of that transaction means the market value (determined in accordance with Schedule 3 to the principal Act) of the effective volume of oil, multiplied by the designated fraction for the month in question.]

[F11(2B)In the case of a nominated transaction which is a disposal to which subsection (5A) of section 2 of the principal Act applies, for the amount which, apart from this sub-paragraph, would be the nominated price for the purposes of sub-paragraph (2) above there shall be substituted the amount which, under that subsection, is deemed to be the price received or receivable for the oil in question.]

(3)If the participator’s equity production for a month exceeds his aggregate effective volume for that month, as defined in paragraph 10 above, the market value of the excess shall be determined in accordance with Schedule 3 to the principal Act.

(4)The reference in sub-paragraph (2) above to the nominated price is a reference to that price expressed in sterling; and regulations made by the Board shall make provision with respect to the conversion into sterling of any nominated price which is expressed in a currency other than sterling.

[F9(5)For any month the designated fraction is such fraction as may be specified for the purposes of that month by order made by the Treasury.

(6)An order under sub-paragraph (5) above—

(a)shall not specify a fraction smaller than unity or greater than 3/2;

(b)may be made to have effect for any month in the chargeable period in which falls the date on which the order is made (whether that month begins before, on or after that date);

(c)If it has effect for a month earlier than the date on which it is made, may contain such transitional provisions as the Treasury consider appropriate; and

(d)shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of the House of Commons.]

Blended oilU.K.

12[F12(1)If a person is a participator in two or more oil fields which, in relation to any blended oil, are or are included among the originating fields, then, in accordance with regulations made by the Board, he may make a nomination, having effect with respect to all the originating fields in which he is a participator, of a proposed sale, supply or appropriation of the blended oil]; and the preceding provisions of this Schedule shall have effect in relation to such a nomination subject to such modifications as may be prescribed by regulations made by the Board.U.K.

[F12(2)In sub-paragraph (1) above “blended oil” and “the originating fields” have the same meaning as in section 63 of this Act.]

ReturnsU.K.

13U.K.In paragraph 2 of Schedule 2 to the principal Act (returns by participators) at the end of sub-paragraph (3) there shall be inserted the following sub-paragraph—

“(3A)A return under this paragraph for a chargeable period shall—

(a)state the amount (if any) which, in the case of the participator, is to be brought into account for that period in accordance with section 2(5)(e) of this Act;

(b)contain such particulars as the Board may prescribe (whether before or after the passing of the Finance Act 1987) with respect to any nominated transaction under Schedule 10 to that Act—

(i)the effective volume of which forms part of the participator’s aggregate effective volume (construing those terms in accordance with that Schedule) for any calendar month comprised in that chargeable period; and

(ii)which has not led to deliveries of oil or relevant appropriations of which particulars are included in the return by virtue of sub-paragraph (2) above; and

(c)contain such other particulars as the Board may prescribe (as mentioned above) in connection with the application of section 61 of and Schedule 10 to the Finance Act 1987.”