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HMRC internal manual

Oil Taxation Manual

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HM Revenue & Customs
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PRT: non-field expenditure - associated company claims

OTA75\S5(1)(a) in the case of abortive exploration and OTA75\S5A(1)(a) in the case of exploration and appraisal permit such expenditure to be included in a participator’s claim if it is incurred

  • either by the participator, or
  • where the participator is a company, by a company ‘associated’ with the participator.

‘Associated’ for these purposes is defined in OTA75\S5(7)-(8), which are applied to OTA75\5A by virtue of OTA75\S5A(4). The requirement is that throughout the part of the ‘relevant period’ in which both companies were in existence,

  • one was the ultimate 51% parent of the other
  • or both had the same ultimate 51% parent.

The relevant period begins on the date immediately preceding that on which the expenditure was incurred and ends on whichever of the following periods ends later

  • (i) the earliest chargeable period in which the claimant company was a participator in the field against which the OTA75\SCH7 claim is lodged and
  • (ii) the chargeable period (for that field) in which the expenditure was incurred.

ICTA\S838 applies to define the 51% parent-subsidiary relationship.

There are similar provisions relating to claims for unrelievable field losses under OTA75\SCH8, see OT16250.

However, in the case of research, OTA75\S5B does not include a provision enabling relief to be given for expenditure incurred by a company associated with the claimant participator company. See OT14140 for more detail.