PRT: valuation of non-arm's length disposals and appropriations - gas - re-opening an election in force at 31 December 1993
An election normally continues in force until the period specified expires. The legislation does however give three specific circumstances when the election may be re-opened.
Market value ceasing to be readily ascertainable (FA82\SCH18\PARA5)
This covers for example a situation where an index used in the escalator is no longer published and allows the Board to give notice of termination against which the parties to the election may appeal.
Price formula ceasing to give realistic market values (FA82\SCH18\PARA6)
If at any time after the expiry of a period of five years after the first delivery of gas covered by an election it appears that by reason of any substantial and lasting change in any economic circumstances which were relevant at the time the price formula was considered, the market values determined in accordance with the price formula are no longer realistic, either the Board or the parties to the election may give notice of termination. The parties to the election may appeal against a notice from the Board and the Board may reject a notice from the parties against which the parties may appeal.
Price formula no longer appropriate to pattern of supply (FA82\SCH18\PARA6A)
This covers gases other than ethane for petrochemical use and applies where the gases are being disposed of in a manner, or to an extent or by a pattern of supply which is different from that which was taken into consideration in the acceptance of the election. If, at the time the election was being considered, the Board had taken into account as a probability the way in which the gases are in fact being disposed of, and would have rejected the election, then the Board may give notice of termination. An example of a change in the pattern of supply which may have been material is a change in the swing. It is also specified in the legislation that if, in any chargeable period, the extent to which gases are disposed of is such that the seller would, in an arm’s length contract, incur financial penalties for failing to meet the pattern of supply specified in the election and those penalties would not be insubstantial, then this is a ground for the Board to terminate the election. The parties to the election may appeal against a notice given by the Board.