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HMRC internal manual

Oil Taxation Manual

PRT: Changes - FA93 - Tariffs and tariff-related expenditure

Where both the paying and receiving fields are “taxable”, then both the relief for the tariff- related expenditure and the corresponding tariff income will be within the scope of PRT, and the pre FA93 rules will continue to operate.

On the other hand, where both the tariff-related expenditure and the tariff income relate only to “non-taxable” fields then they will both be outwith the scope of PRT.

FA93\S193(2)(3) is an anti-avoidance provision which denies an expenditure deduction for tariffs or other payments from a “taxable” field to a “non-taxable” field where any of the participators in the two fields are ‘connected within the meaning of ICTA88\S839. It is aimed at preventing inflated tariff or other payments, e.g. service charges, between connected parties that reduce profits for PRT and is necessary because the corresponding receipt will not itself be chargeable to PRT.

For example a participator who has already built a pipeline will gain no benefit from re-routing it to a “non-taxable” field in which he or someone associated with him is a participator and arranging for a tariff to be paid to the “non-taxable” field.

Tariffs - transmedian fields

FA93\S193(4) amends OTA83\S12(3) so that, for a transmedian field, if that part of the field on the UK side of the boundary is a taxable field, then the foreign part of the field shall be treated as if it were a taxable field for tariffing and disposals. If the UK side is non-taxable, then the foreign part will also be treated as non-taxable.