Corporation Tax Act 2010

Chapter 7U.K.[F1REDUCTION OF SUPPLEMENTARY CHARGE FOR ELIGIBLE OIL FIELDS]

Reduction of adjusted ring fence profitsU.K.

333Reduction of adjusted ring fence profitsU.K.

(1)A company's adjusted ring fence profits for an accounting period are to be reduced by the amount of the company's pool of field allowances for that accounting period (see sections 334 to 336).

(2)But, if the profits are less than the amount of the pool, the profits are to be reduced to nil.

Pool of field allowancesU.K.

334Company's pool of field allowancesU.K.

A company's pool of field allowances for an accounting period (“the relevant accounting period”) is—

335Carrying part of pool of field allowances into following periodU.K.

(1)This section applies if —

(a)a company has a pool of field allowances for an accounting period (“accounting period 1”), and

(b)the company's adjusted ring fence profits for accounting period 1 are reduced to nil in accordance with section 333(2).

(2)A part of the company's pool of field allowances for accounting period 1 is to be carried into the following accounting period (“accounting period 2”).

(3)The part to be carried into accounting period 2 is—

336Carrying whole of pool of field allowances into following periodU.K.

(1)This section applies if a company—

(a)has a pool of field allowances for an accounting period, but

(b)has no adjusted ring fence profits for the accounting period.

(2)The whole of the company's pool of field allowances for the accounting period is to be carried into the following accounting period.

Field allowance: when held and unactivated amountU.K.

337[F3Licensee to hold field allowance]U.K.

(1)A company that is [F4a licensee in an additionally-developed oil field or a new oil field (an “eligible oil field”) on the authorisation day] is to hold a field allowance for that field as from the beginning of the [F5accounting period in which the authorisation day falls] [F6(and accordingly may hold more than one field allowance for the field at the same time) ].

(2)The amount of the field allowance which the licensee is to hold at that time is—

338Holding a field allowance on acquisition of equity shareU.K.

For provision about holding a field allowance by virtue of the acquisition of a share of the equity in [F9an eligible oil field], see section 347(2).

339Unactivated amount of field allowanceU.K.

(1)This section applies if a company holds a field allowance for [F10an eligible oil field] by virtue of section 337 or 347(2).

(2)The unactivated amount of that allowance at a particular time (“the relevant time”) is—

(3)A company ceases to hold a field allowance for [F10an eligible oil field] if the unactivated amount of that allowance falls to nil.

No change in equity share: activation of allowanceU.K.

340Introduction to section 341U.K.

(1)Section 341 applies to a company in respect of [F11an eligible oil field] and an accounting period if the following conditions are met.

(2)Condition A is that the company is a licensee in the field for the whole of the accounting period.

(3)Condition B is that the company's share of the equity in the field is the same during the whole of the accounting period.

(4)Condition C is that the company holds an unactivated amount of field allowance for the field at the beginning of the accounting period.

(5)Condition D is that the company has relevant income from [F12the field] in the accounting period.

[F13(6)But in a case where the field is an additionally-developed oil field in relation to which a qualifying project has been authorised as mentioned in section 349A(1)(a), the company is to be treated as having relevant income from the field in the accounting period if, and only if—

(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 field.

(7)For the purposes of subsection (6)—

(a)“the year of expected first production” for the field is the year that was notified to the national authority, on or before the day on which the project was authorised, 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, and

(b)“qualifying project” means a project meeting the conditions in subsection (1)(aa) and (b) of section 349A.]

341Activation of field allowanceU.K.

(1)An amount of the company's field allowance for [F14 the eligible oil field] is to be activated in respect of the accounting period.

(2)The amount of the field allowance to be activated is the smallest of the following amounts—

(a)the relevant activation limit,

(b)the company's relevant income from the field in the accounting period, and

(c)the unactivated amount of the field allowance which the company holds at the beginning of the accounting period.

(3)The relevant activation limit is—

[F16(4)Subsection (5) applies for the purpose of determining the amount of a company's field allowance for an eligible oil field (“the relevant field allowance”) to be activated in a case where—

(a)the company holds one or more other field allowances for the field, and

(b)at the time when the company began to hold the relevant field allowance, the company already held one or more of those other field allowances (an “earlier field allowance”).

(5)The amount of the company's relevant income from the field in the accounting period is to be reduced (but not to below nil) by the amount of any earlier field allowance activated in respect of the accounting period.

(6)In a case where the company began to hold two or more field allowances at the same time, the company may determine the order in which the company is to be regarded for the purposes of this section as having begun to hold them.]

Change in equity share: activation of allowanceU.K.

342Introduction to sections 343 and 344U.K.

(1)Sections 343 and 344 apply to a company in respect of [F17an eligible oil field] and an accounting period if the following conditions are met.

(2)Condition A is that the company is a licensee in the field for the whole, or for part, of the accounting period.

(3)Condition B is that the company's share of the equity in the field is different at different times during the accounting period.

(4)Condition C is that the company holds an unactivated amount of field allowance for the field at any time during the accounting period.

(5)Condition D is that the company has relevant income from the field in the accounting period.

[F18(5A)But in a case where the field is an additionally-developed oil field in relation to which a qualifying project has been authorised as mentioned in section 349A(1)(a), the company is to be treated as having relevant income from the field in the accounting period if, and only if—

(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 field.

(5B)For the purposes of subsection (5A)—

(a)“the year of expected first production” for the field is the year that was notified to the national authority, on or before the day on which the project was authorised, 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, and

(b)“qualifying project” means a project meeting the conditions in subsection (1)(aa) and (b) of section 349A.]

(6)In a case where a company has three or more different shares of the equity in [F19an eligible oil field] during a particular day, sections 343 and 344 (in particular provisions relating to the beginning or end of a day) have effect subject to the necessary modifications.

343Reference periodsU.K.

(1)For the purposes of section 344, 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, is to be divided into reference periods.

(2)A reference period is a period of consecutive days that meets the following conditions.

(3)Condition A is that, at the beginning of each day in the period, the company is a licensee in [F20the eligible oil field ].

(4)Condition B is that, at the beginning of each day in the period, the company's share of the equity in the field is the same.

(5)Condition C is that, at the beginning of the first day of the period, the company holds an unactivated amount of field allowance for the field.

(6)Condition D is that each day in the period falls within the accounting period.

344Activation of field allowanceU.K.

(1)An amount of the company's field allowance for [F21the eligible oil field] is to be activated in respect of each reference period.

(2)The amount of the field allowance to be activated is the smallest of the following amounts—

(a)the relevant activation limit,

(b)the company's relevant income from the field in the reference period, and

(c)the unactivated amount of the field allowance which the company holds at the beginning of the reference period.

(3)The relevant activation limit is—

(4)The company's relevant income from the field in the reference period is—

[F24(5)Subsection (6) applies for the purpose of determining the amount of a company's field allowance for an eligible oil field (“the relevant field allowance”) to be activated in a case where—

(a)the company holds one or more other field allowances for the field, and

(b)at the time when the company began to hold the relevant field allowance, the company already held one or more of those other field allowances (an “earlier field allowance”).

(6)The amount of the company's relevant income from the field in the reference period is to be reduced (but not to below nil) by the amount of any earlier field allowance activated in respect of the reference period.

(7)In a case where the company began to hold two or more field allowances at the same time, the company may determine the order in which the company is to be regarded for the purposes of this section as having begun to hold them.]

Change in equity share: transfer of field allowanceU.K.

345Introduction to sections 346 and 347U.K.

(1)Sections 346 and 347 apply if the following conditions are met.

(2)Condition A is that a company that is a licensee in [F25an eligible oil field] (“the transferor”) disposes of the whole or a part of its share of the equity in [F26the field] (and in section 347 each of those to which a share of the equity is disposed of is referred to as “a transferee”).

(3)Condition B is that, immediately before the disposal, the transferor holds an unactivated amount of field allowance for [F27the field].

(4)Subsection (5) applies when—

(a)determining (for the purposes of this section) whether a transferor holds an unactivated amount of field allowance immediately before the disposal (“the relevant time”), and

(b)determining (for the purposes of section 346), the unactivated amount of field allowance which a transferor holds at the relevant time;

but it applies only if an amount of field allowance for [F27the field] (“the relevant amount”) has, by virtue of section 344, been activated in respect of the reference period that ends because of the disposal.

(5)When making the determination, the relevant amount of the field allowance must be treated as having been activated at a time before the relevant time.

(6)In a case where a company has three or more different shares of the equity in [F28an eligible oil field] during a particular day, sections 346 and 347 (in particular provisions relating to the beginning or end of a day) have effect subject to the necessary modifications.

346Reduction of field allowance if equity disposed ofU.K.

(1)The unactivated amount of the field allowance for [F29the eligible oil field] which the transferor holds immediately before the disposal is to be reduced by the following amount—

(2)This section has effect at the end of the day on which the disposal takes place.

347Acquisition of field allowance if equity acquiredU.K.

(1)If a transferee holds a field allowance for [F31the eligible oil field] immediately before the disposal, the unactivated amount of the field allowance is to be increased by the amount calculated in accordance with subsection (4).

(2)If a transferee does not hold a field allowance for [F32the eligible oil field] immediately before the disposal, the transferee is to hold a field allowance for [F33the field].

(3)The amount of the field allowance which the transferee is to hold is calculated in accordance with subsection (4).

(4)The amount referred to in subsections (1) and (3) is—

(5)This section has effect at the end of the day on which the disposal takes place.

MiscellaneousU.K.

348AdjustmentsU.K.

(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 had 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 333 on the profits or to the calculation of the company's pool of field allowances for a subsequent accounting period).

349OrdersU.K.

(1)The Commissioners for Her Majesty's Revenue and Customs may by order make provision about the oil fields that are [F35additionally-developed oil fields or] qualifying oil fields for the purposes of this Chapter.

(2)The Commissioners for Her Majesty's Revenue and Customs may by order make provision about the amount of the total field allowance for any description of [F36eligible oil field] (whether or not provision has been made under subsection (1) about that description of [F36eligible oil field] ).

[F37(2A)The Commissioners for Her Majesty's Revenue and Customs may by order make provision about the meaning of any term used in this Chapter.]

[F38(3)The provision that may be made by an order under this section includes—

(a)provision amending this Chapter,

(b)provision that has effect in relation to times before the order is made and does not increase any person's liability to tax, and

(c)incidental, supplemental, consequential, transitional or saving provision, including provision amending, repealing or revoking any provision made by or under this Act.]

(4)No order may be made under this section unless a draft of the statutory instrument containing it has been laid before and approved by a resolution of the House of Commons.

InterpretationU.K.

[F39349A“Additionally-developed oil field”U.K.

(1)In this Chapter an oil field is an “additionally-developed oil field” if—

[F40(a)since the time when consent for development of the oil field was first granted, the national authority has authorised a project in relation to the field,

(aa)the project is described in a further consent for development of the field, and]

(b)the project meets such conditions as may be specified in an order made by the Commissioners for Her Majesty's Revenue and Customs.

(2)In this section—

• “consent for development”, in relation to an oil field, does not include consent which is limited to the purpose of testing the characteristics of an oil-bearing area,

• “development”, in relation to an oil field, means winning oil from the field otherwise than in the course of searching for oil or drilling wells, and

• “national authority” means—

  (a)

  the Secretary of State, or

  (b)

  a Northern Ireland department.

(3)An order under this section may include provision having effect in relation to times before it is made, provided that it does not increase any person's liability to tax.

(4)No order may be made under this section unless a draft of the statutory instrument containing it has been laid before and approved by a resolution of the House of Commons.]

[F41350“New oil field”U.K.

(1) In this Chapter “ new oil field ” means an oil field—

(a)which is a qualifying oil field, and

(b)whose development (in whole or in part) is authorised for the first time on or after 22 April 2009.

(2)If all assets of an oil field which are relevant assets have been decommissioned, there is to be ignored for the purposes of subsection (1)(b) any authorisation in respect of that oil field which occurs before that decommissioning.

(3) Sub-paragraphs (2) to (9) of paragraph 7 of Schedule 1 to OTA 1975 apply for the purpose of determining whether relevant assets of an oil field are decommissioned as they apply for the purpose of determining whether qualifying assets of a relevant area are decommissioned.

(4)For the purposes of this section, an asset is a relevant asset of an oil field if—

(a)it has at any time been a qualifying asset (within the meaning of the Oil Taxation Act 1983) in relation to any participator in the field, and

(b)it has at any time been used for the purpose of winning oil from the field.]

351“Authorisation of development of an oil field”U.K.

(1)In this Chapter a reference to authorisation of development of an oil field is a reference to a national authority—

(a)granting a licensee consent for development for the field,

(b)serving on a licensee a programme of development for the field, or

(c)approving a programme of development for the field.

(2)In this section—

• “consent for development”, in relation to an oil field, does not include consent which is limited to the purpose of testing the characteristics of an oil-bearing area,

• “development”, in relation to an oil field, means winning oil from the field otherwise than in the course of searching for oil or drilling wells, and

• “national authority” means—

  (a)

  the Secretary of State, or

  (b)

  a Northern Ireland department.

352“Qualifying oil field”U.K.

In this Chapter “qualifying oil field” means an oil field that is, on the authorisation day—

(a)a small oil field,

(b)an ultra heavy oil field, F42...

(c)an ultra high pressure/high temperature oil field,

[F43(d)a large deep water oil field,

(e)a large shallow water gas field, or

(f)a deep water gas field.]

353“Small oil field”U.K.

(1)In this Chapter “small oil field” means an oil field which has reserves of oil of [F447,000,000 tonnes] or less.

(2)For the purposes of this section and section 356(2)—

(a)the amount of reserves of oil which an oil field has is to be determined on the authorisation day, and

(b)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.

354“Ultra heavy oil field”U.K.

(1)In this Chapter “ultra heavy oil field” means an oil field with oil at—

(a)an API gravity below 18 degrees, and

(b)a viscosity of more than 50 centipoise at reservoir temperature and pressure.

(2)For that purpose API gravity, in relation to oil, is the amount determined by the following calculation—

355“Ultra high pressure/high temperature oil field”U.K.

In this Chapter “ultra high pressure/high temperature oil field” means an oil field with oil at—

(a)a pressure of more than [F45862] bar in the reservoir formation, and

(b)a temperature of more than [F46166] degrees celsius in the reservoir formation.

[F47355A“Large deep water oil field”U.K.

(1)In this Chapter “large deep water oil field” means an oil field that meets conditions A to C.

(2)Condition A is that the field was authorised for the first time on or after 21 March 2012.

(3)Condition B is that the field has reserves of oil of—

(a)25,000,000 tonnes or more, but

(b)less than 55,000,000 tonnes.

(4)Condition C is that the depth of the sea above the field is greater than 1,000 metres.

(5)For the purposes of this section and section 356(4)—

(a)the amount of reserves of oil which an oil field has is to be determined on the authorisation day,

(b)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, and

(c)the depth of the sea above an oil field is to be measured at the lowest astronomical tide from the water surface to the lowest point of the natural sea bed at the location of the primary subsea manifold or the first development well, whichever is the deeper.

355B“Large shallow water gas field”U.K.

(1)In this Chapter “large shallow water gas field” means an oil field that meets conditions A to D.

(2)Condition A is that the field was authorised for the first time on or after 25 July 2012.

(3)Condition B is that more than 95% of the reserves of oil which the field has consist of gas.

(4)Condition C is that the depth of the sea above the field is less than 30 metres.

(5)Condition D is that the amount of reserves of gas which the field has, or, where there are one or more oil fields related to the field, the total amount of reserves of gas which the field and those related oil fields together have, is—

(a)10 billion cubic metres or more, but

(b)less than 25 billion cubic metres.

(6)For the purposes of subsection (5) and section 356(5), an oil field is “related” to another oil field if—

(a)the field meets conditions A to C, and

(b)the authorisation day for each oil field is the same.

(7)For the purposes of this section and section 356(5)—

(a)the amount of reserves of oil which an oil field has is to be determined on the authorisation day,

(b)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, and

(c)the depth of the sea above an oil field is to be measured at the lowest astronomical tide from the water surface to the highest point of the natural sea bed at the location of the primary subsea manifold or the first development well, whichever is the shallower.

355C“Deep water gas field”U.K.

(1)In this Chapter “deep water gas field” means an oil field that meets conditions A to C.

(2)Condition A is that more than 75% of the reserves of oil which the field has consist of gas.

(3)Condition B is that the depth of the sea above the field is more than 300 metres.

(4)Condition C is that the length of the planned route of the primary pipe-line, or pipe-lines, to be used for transporting gas from the field to the relevant infrastructure is more than 60 kilometres.

(5)For the purposes of subsection (4)—

(a)the length of the planned route is to be determined on the authorisation day,

(b)“pipe-line” has the same meaning as in the Pipe-lines Act 1962 (see section 65 of that Act),

(c)“the relevant infrastructure”, in relation to an oil field, means any pipe-line or gas processing facility which is used by, or is intended to be used by, another oil field whose development was authorised before the authorisation day for the oil field, and

(d)“gas processing facility” has the meaning given by section 90(1) of the Energy Act 2011 .

(6)For the purposes of this section—

(a)the amount of reserves of oil which an oil field has is to be determined on the authorisation day,

(b)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, and

(c)the depth of the sea above an oil field is to be measured at the lowest astronomical tide from the water surface to the lowest point of the natural sea bed at the location of the primary subsea manifold or the first development well, whichever is the deeper.]

356“Total field allowance for a new oil field”U.K.

(1)For the purposes of this Chapter, the total field allowance for a new oil field is—

(a)in the case of a small oil field, the amount determined in accordance with subsection (2),

(b)in the case of an ultra heavy oil field, £800,000,000, F48...

(c)in the cases of an ultra high pressure/high temperature oil field, [F49the amount determined in accordance with subsection (3)].

[F50(d)in the case of a large deep water oil field, the amount determined in accordance with subsection (4),

(e)in the case of a large shallow water gas field, the amount determined in accordance with subsection (5), and

(f)in the case of a deep water gas field, the amount determined in accordance with subsection (6).]

[F51(2)The total field allowance for a small oil field is—

(a)if the field has reserves of oil of 6,250,000 tonnes or less, £150,000,000, and

(b)in any other case (where the oil field has reserves of more than 6,250,000 tonnes but not more than 7,000,000 tonnes) the following amount—

[F52(3)The total field allowance for an ultra high pressure/high temperature oil field is—

(a)£800,000,000, if the temperature of oil in the reservoir formation is more than 176.67 degrees celsius, and

(b)if the temperature of oil in the reservoir formation is more than 166 degrees celsius but not more than 176.67 degrees celsius, the sum of £500,000,000 and an amount calculated as follows—

[F53(4)The total field allowance for a large deep water oil field is —

• where X is—

  (a)

  in a case where the amount of the reserves of oil which the field has is 40,000,000 tonnes or less, 40,000,000,

  (b)

  in any other case (where the oil field has reserves of more than 40,000,000 tonnes but not more than 55,000,000 tonnes) the amount of the reserves of oil (in tonnes) which the field has.

(5)The total field allowance for a large shallow water gas field is—

(6)The total field allowance for a deep water gas field is—

• D is—

(7)In subsection (6) “the planned pipe-line route”, in relation to a deep water gas field, means the planned route of the pipe-line (or pipe-lines) to be used for transporting gas from the field as mentioned in section 355C(4).

(8)If an oil field falls within more than one of the descriptions of oil field listed in section 352 (“qualifying oil field”), then for the purposes of this section the field is to be regarded as being of the description that produces the greatest total field allowance for that field.]

[F54356A“Total field allowance for an additionally-developed oil field”U.K.

(1)For the purposes of this Chapter, the total field allowance for an additionally-developed oil field in relation to which a qualifying project has been authorised as mentioned in section 349A(1)(a) is—

(a)if the field is not a cross-boundary field, the amount determined in accordance with subsection (2), and

(b)if the field is a cross-boundary field, the amount determined in accordance with subsection (3).

This is subject to subsections (4) and (7).

(2)In a case where the field is not a cross-boundary field, the total field allowance for the field is—

(3)In a case where the field is a cross-boundary field, the total field allowance for the field is—

(4)The total field allowance for an additionally-developed oil field may not exceed the relevant maximum (see subsection (5)).

(5)The relevant maximum is—

(a)in the case of a licensee in the field who is liable to PRT, £500,000,000, and

(b)in any other case, £250,000,000.

(6)For the purposes of subsection (5) a licensee in an oil field in relation to which a qualifying project has been authorised as mentioned in section 349A(1)(a) is “liable to PRT” if—

(a)it is reasonably expected, as at the authorisation day, that the licensee will be chargeable with petroleum revenue tax for a chargeable period in respect of its share of the equity in the field, and

(b)the chargeable period is one in which oil is reasonably expected, as at the authorisation day, to be won from the field as a result of the project.

(7)In a case where—

(a)the field is not the only additionally-developed oil field that has additional reserves of oil as a result of the project, and

(b)the sum of the amounts determined in accordance with subsection (2) or (3) (as the case may be) in relation to each of those oil fields is greater than the relevant maximum (see subsection (5)),

the total field allowance for the field is the relevant percentage of the amount determined in accordance with subsection (2) or (3) (as the case may be) in relation to the field.

(8)The relevant percentage is—

(9)For the purposes of this section—

(a)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,

(b)“cost per tonne”, in relation to a project, has the same meaning as in article 2 of the Additionally-developed Oil Fields Order 2013,

(c)“cross-boundary field” has the meaning given by section 10(9) of the Petroleum Act 1998,

(d)“qualifying project” means a project meeting the conditions in subsection (1)(aa) and (b) of section 349A, and

(e)“UK marine area” has the same meaning as in the Marine and Coastal Access Act 2009 (see section 42 of that Act).]

357Other definitionsU.K.

[F55(1)]In this Chapter—

• “adjusted ring fence profits”, in relation to a company and an accounting period, means the adjusted ring fence profits that would (if this Chapter were ignored) be taken into account in calculating the supplementary charge on the company under section 330(1) for the accounting period,

• [F56“authorisation day” means—

  (a)

  [F57in relation to an additionally-developed oil field and a project authorised in relation to the field as mentioned in section 349A(1)(a), the day when the project is so authorised,]

  (b)

  in relation to a new oil field, the day when development of the field is authorised as mentioned in section 350(1)(b),]

• [F58“eligible oil field” means an oil field which is an additionally-developed oil field or a new oil field,]

• F59...

• “licensee” has the same meaning as in Part 1 of OTA 1975, and

• “relevant income”, in relation to [F60an eligible oil field] and an accounting period of a company, means production income of the company from any oil extraction activities carried on in the field that is taken into account in calculating the company's adjusted ring fence profits for the accounting period.

[F61(2)Any reference in this Chapter to a share of the equity in an oil field (other than the reference in section 356A(6)) is, in the case of an additionally-developed oil field and a project authorised in relation to the field as mentioned in section 349A(1)(a), to be read as a reference to a share of the additional reserves of oil which the field has as a result of the project.]