Finance Bill - continued        House of Lords

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  PART IV
  OIL TAXATION
Excluded oil.     94. - (1) This section applies where-
 
 
    (a) a contract ("the old contract") provides for the sale by a person ("A") of oil consisting of gas to the British Gas Corporation or one of its successors ("the purchaser");
 
    (b) the old contract is a contract made, or treated (by virtue of this section) as made, before the end of June 1975;
 
    (c) the old contract is replaced by a contract ("the new contract") for the sale of oil consisting of gas to the purchaser made after the end of June 1975; and
 
    (d) any of the rights and liabilities which, under the old contract, were rights and liabilities of A are, under the new contract, rights and liabilities of another person ("B").
      (2) The new contract shall be treated for the purposes of section 10(1)(a) of the Oil Taxation Act 1975 as the same contract as the old contract unless the rights and liabilities of B under the new contract are so different from those of A under the old contract that a contract conferring those rights and imposing those liabilities on A could not have been regarded as the same contract as the old contract.
 
      (3) For the purposes of subsection (1) above the successors of the British Gas Corporation are-
 
 
    (a) British Gas plc; and
 
    (b) British Gas Trading Limited.
      (4) This section shall be deemed always to have had effect.
 
Sale and lease-back.     95. - (1) This section applies to a lease ("the lease in question") of an asset ("the relevant asset") where-
 
 
    (a) a person ("the seller") who is a participator in an oil field ("the seller's oil field") has made a disposal in a chargeable period of the relevant asset or an interest in it;
 
    (b) the relevant asset was a qualifying asset in relation to the seller and the seller's oil field is the chargeable field in relation to it;
 
    (c) the relevant asset is used in connection with an oil field ("the lessee's oil field") by a participator in that field ("the lessee") under the lease in question;
 
    (d) the seller, or a person connected with him at any time in the relevant period, is the lessee; and
 
    (e) the lessee uses the relevant asset before the end of the period of two years beginning with the disposal.
      (2) Subject to subsection (8) below, to the extent that the expenditure falling within subsection (3) below exceeds the amount of the cap, that expenditure shall not be allowable under section 3 or 4 of the principal Act or section 3 of the Oil Taxation Act 1983 for the lessee's oil field.
 
      (3) That expenditure is the aggregate of the following-
 
 
    (a) the total expenditure, excluding operating expenditure, incurred by the lessee under the lease in question; and
 
    (b) if at any time after the disposal he acquires the relevant asset or an interest in it, the total expenditure (not falling within paragraph (a) above) incurred by him in acquiring the asset or interest.
      (4) Subject to subsections (5) to (7) below-
 
 
    (a) if the period in which the disposal was made is one in which the seller has benefitted from safeguard relief, the amount of the cap is the smaller of-
 
      (i) the amount given by dividing the marginal tax on the disposal receipts by the applicable rate of tax; and
 
      (ii) the amount of the disposal receipts; and
 
    (b) in any other case the amount of the cap is the amount of the disposal receipts.
      (5) Subject to subsection (7) below, where at the relevant time there are, in relation to the relevant asset, two or more leases to which this section applies, the amount of the cap for the lease in question shall be the appropriate proportion of the cap found by applying subsection (4) above.
 
      (6) For the purposes of subsection (5) above the appropriate proportion is the proportion given by the formula-

A
----
B
 

  where-
 
       A is the proportion of the total use of the relevant asset during the term of the lease in question that is expected to be use under the lease; and
 
       B is-
 
 
      (a) in a case where the seller disposed of the whole of the relevant asset, one; and
 
      (b) in any other case, the proportion that the value of the interest disposed of by him bore to the total value of the relevant asset.
      (7) Where at the relevant time the relevant asset is used, or is expected to be used, by the lessee under the lease in question in connection with two or more oil fields, the amount of the cap for each of the fields shall be so much of the cap found by applying subsections (4) to (6) above as accords with the proportion of the use of the asset under the lease that is expected, at that time, to be-
 
 
    (a) use in connection with that field; or
 
    (b) use giving rise to tariff receipts of the lessee attributable to that field.
      (8) Where-
 
 
    (a) expenditure falling within subsection (3) above has been allowed for the lessee's oil field, on a claim under Schedule 5 or 6 to the principal Act, on the basis that the cap was of a particular amount;
 
    (b) information later becomes available to the Board which establishes that the cap is not of that amount; and
 
    (c) the amount that was allowed exceeds the amount (if any) of the expenditure falling within that subsection that would have been allowed on the claim if the information had been available when the expenditure was allowed,
  the excess shall continue to be allowable.
 
      (9) Subject to subsection (10) below, this section and sections 96 and 97 below apply to assets, or interests in assets, disposed of on or after 9th March 1999.
 
      (10) This section and those sections do not apply to assets, or interests in assets, disposed of pursuant to an agreement made before that date if-
 
 
    (a) the agreement is not conditional; or
 
    (b) the agreement is conditional and the condition is satisfied before that date.
Transfer of field interest.     96. - (1) This section applies where-
 
 
    (a) section 95 above has applied to a lease;
 
    (b) the lessee has transferred the whole or part of his interest in the lessee's oil field; and
 
    (c) pursuant to the transfer, the relevant asset is used in connection with that oil field under a lease ("the new participator's lease") by the person who is the new participator in relation to the transfer.
      (2) Subject to subsection (4) below, section 95 above shall have effect as if the new participator were the lessee and the new participator's lease were the lease in question.
 
      (3) The reference in subsection (1)(b) above to the lessee includes a reference to a successor of his; and subject to subsection (4) below, the expenditure that the new participator is treated by virtue of subsection (2) above as having incurred includes-
 
 
    (a) any expenditure, excluding operating expenditure, incurred by the lessee or a successor of his under the lease in question or a lease of the relevant asset; and
 
    (b) any expenditure (not falling within paragraph (a) above) incurred by the lessee or a successor of his after the disposal mentioned in section 95(1)(a) above in acquiring the relevant asset or an interest in it.
      (4) Where the transfer mentioned in subsection (1)(b) above, or any antecedent transfer, was a transfer of part of the transferor's interest in the lessee's oil field-
 
 
    (a) the amount of the cap which is applicable by virtue of subsection (2) above shall be so much of the cap that would be applicable apart from this subsection as accords with the proportion of the lessee's interest in the field that is represented by the new participator's interest in the field; and
 
    (b) the expenditure incurred (as mentioned in subsection (3) above) by the lessee or any successor of his that is treated, by virtue of subsection (2) above, as expenditure incurred by the new participator shall be so much of the expenditure incurred (as so mentioned) by the person concerned as accords with the proportion of that person's interest in the field that is represented by the new participator's interest in the field.
      (5) A person is a successor of the lessee for the purposes of this section if and only if-
 
 
    (a) this section has applied to an earlier transfer by the lessee or a successor of his of the whole or part of his interest in the lessee's oil field; and
 
    (b) that person was the new participator in relation to the earlier transfer and used the relevant asset under the lease in connection with that oil field.
      (6) In this section "antecedent transfer" means a transfer (other than the transfer mentioned in subsection (1)(b) above) by the lessee or a successor of his of the whole or part of his interest in the lessee's oil field, pursuant to which the relevant asset was used as mentioned in subsection (1)(c) above.
 
 
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