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HMRC internal manual

Oil Taxation Manual

From
HM Revenue & Customs
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PRT: terminal liftings - disposal of field interests - examples

Example 1:

Big Fish Plc is selling its interest in Flippers field to Small Fry Ltd (unconnected). The completion date is 30 June. Flippers is part of Pisces blend.

Big Fish has two other field interests in Pisces:

Fin - June Production entitlement 100,000

Scales - June Production entitlement 300,000

Flippers production entitlement for June is 200,000

At 30 June Flippers’ stock position is as follows:

Operational closing stock 40,000

Tax closing stock 100,000

Difference (Tax Closing stock LESS operational Closing stock) = 60,000

Reallocation:

  Fin: 60,000 x 100,000 / 400,000 = 15,000
     
  Scales: 60,000 x 300,000 / 400,000 = 45,000

Tax allocated liftings in June

  Fin 50,000
     
  Scales 150,000
  Flippers 100,000
  Total 300,000

Tax closing stock before adjustment

  Fin 50,000
     
  Scales 150,000
  Flippers 100,000
  Total 300,000

Tax closing stock after adjustment

  Fin 65,000 (i.e. 50,000 + 15,000)
       
  Scales 195,000 (i.e. 150,000 + 45,000)
  Flippers 40,000 (i.e. same as operational closing stock)
  Total 300,000  

Example 2:

Bigger Fish Plc is selling its interest in Fluke field to Smaller Fry Ltd (unconnected). The Completion date is 30 June. Fluke is part of Pisces blend. Bigger Fish has two other field interests in Pisces:

Fin - June production entitlement 100,000

Scales - June production entitlement 300,000

Fluke production entitlement for June is 200,000

At 30 June Fluke’s stock position is as follows:

Operational closing stock 100,000

Tax closing stock 40,000

Difference (Tax Closing stock LESS operational Closing stock) = -60,000

Reallocation:

  Fin: 60,000 x 100,000\400,000 = 15,000
     
  Scales: 60,000 x 300,000\400,000 = 45,000

Tax allocated liftings in June

  Fin 50,000
     
  Scales 150,000
  Fluke 100,000
  Total 300,000

Tax closing stock before adjustment

  Fin 50,000
     
  Scales 150,000
  Fluke 40,000
  Total 240,000

Tax closing stock after adjustment

  Fin 35,000 (i.e. 50,000 - 15,000)
       
  Scales 105,000 (i.e. 150,000 - 45,000)
  Fluke 100,000 (i.e. same as operational closing stock)
  Total 240,000  

Summary of examples

  Tax Closing stock LESS operational Closing stock Departing field Remaining field(s)
       
  Result is POSITIVE Reduce tax stock by deducting the positive figure Increase tax stock by adding the positive figure
  Result is NEGATIVE Increase tax stock by deducting the negative figure Reduce tax stock by adding the negative figure