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HMRC internal manual

Oil Taxation Manual

HM Revenue & Customs
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PRT: Valuation of Crude Oils & Products - Valuation of Tariffs in Kind

The terms of agreements for the transport of products by pipeline may provide for payment by means of a tariff per metric tonne of incidental product, often ethane, as tariff in kind.

This tariff in kind needs to be valued and included in gross profits for PRT and ring fence CT purposes. The same amounts are also allowable as expenditure for both levies so that the net effect is likely to be nil.

In such circumstances, and as long as all participators agree to the same treatment, the gas is treated as disposed of at arm’s length for nil consideration, provided that it is agreed by participators that no associated expenditure is claimed for PRT or CT purposes in respect of the value. The quantity of gas provided as tariff in kind is also ignored for oil allowance purposes. In effect the gas is treated as having been used for production purposes (OTA75\S12(1)).