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HMRC internal manual

Oil Taxation Manual

HM Revenue & Customs
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PRT: allowable field expenditure - tariff related expenditure

OTA75\S3(7) and S3(8)

Assets in use for the principal field OTA75\S3(7)

OTA75\S3(7) caters for the situation where expenditure is incurred on a long term asset (OT11400) partly for a field-related purpose and partly for the purpose of tariffing.

Expenditure incurred on an asset for the purpose of earning tariffs is not allowable field expenditure under OTA75\S3(1). Where however the expenditure is incurred on an asset partly for a field-related purpose and partly in connection with the earning of tariff receipts (OT15025) OTA75\S3(7) apportions the tariff- related part of the expenditure to the host field that receives the tariffs. Where expenditure relates in part to the earning of tax-exempt tariffing receipts (OT15810) no relief is available for that part of the expenditure as tax-exempt tariffing receipts are not tariff receipts.

Assets not in use for the principal field OTA8\SCH1\PARA3

OTA75\S3(7) does not apply when production in the host field has ceased and tariffing begins or continues. The rules for allowing tariff-related expenditure on an asset that is no longer used for the principal field are in OTA83\SCH1\PARA3.

OTA83\SCH1\PARA3 applies where:

  • expenditure is incurred in connection with a non-mobile asset (OT11050) and the use of the asset gives rise, or is expected to give rise, to tariff receipts
  • the asset has already been used, or was expected to be used, in connection with the principal field
  • at the end of the claim period in which the expenditure is incurred the asset is no longer being used, and is not expected to be used, in connection with the principal field

Where the relevant conditions are met OTA83\SCH1\PARA3(2) deems the use of the asset that gives rise to tariff receipts to be use in respect of the principal field for the purposes of OTA75\S3 and OTA83\S3. The expenditure incurred is therefore subject to the normal rules for allowance as if it was expenditure incurred in respect of use in the principal field (and see OT11350 Long Term Assets: Assets not in use for the principal field). OTA83\SCH1\PARA3(2) does not apply to tax-exempt tariffing receipts as these are not tariff receipts.

No relief is available for expenditure where participators maintain an asset after production has ceased but there is no tariffing (for example the costs of “mothballing” an asset pending an economic improvement).