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HMRC internal manual

Oil Taxation Manual

HM Revenue & Customs
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PRT: administration: decisions - timing of claim decisions

For the early chargeable periods of a field it may be necessary to make a number of loss determinations so that LB Oil & Gas is in a position to make on time the first assessment which produces a tax liability. It is important to ensure that, as far as is practicable, decisions are made on earlier claim periods first and that when sufficient expenditure and supplement has been agreed wholly to cover incomings the assessment is issued for the earliest chargeable period. After that is done the process can be repeated in similar stages for later claims and chargeable periods. Decisions on claims for a particular period should not be made until assessments have been issued for earlier chargeable periods. In this way problems concerning oil allowance, provisional allowance and safeguard can be avoided. Since FA93 expenditure cannot be allowed for a later period against the income of an earlier period (see OT14560).

In the case of Amoco (UK) Exploration Co v CIR (57TC147) the Revenue delayed making assessments for the first three chargeable periods of the Montrose field even though the incomings for those periods were agreed. Following the making of a decision on an expenditure claim the Revenue proceeded to determine a loss for the first period and to allow that loss against the assessments for the second and third periods. The company contended that the Revenue had been under a duty to make the assessments at the due time and that by not doing so the company had been deprived of the benefit of oil allowance for the chargeable periods in question. It was held in the High Court, dismissing the company’s appeal, that the Revenue had no discretion as to the amount of tax chargeable and that, if they had a choice as to the timing of the assessment, this was not the same as discretion