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HMRC internal manual

Oil Taxation Manual

PRT: Provisional Expenditure Allowance - Examples

Examples

Example A

Oil delivered and appropriated as returned:

CP1 - £2m

CP2 - £3m

CP3 - £4m

CP1: No expenditure claims are made or allowed.

  Provisional allowance for CP1 = 5% x £2m £100,000
     
  less expenditure incurred and allowed in CP1 Nil
    £100,000

CP2: No expenditure claims are made or allowed.

  Provisional allowance for CP2 = 5% x £3m £150,000
     
  less expenditure incurred and allowed in CP2 Nil
    £150,000

CP3: No expenditure claims are made or allowed.

  Provisional allowance for CP3 = 5% x £4m £200,000
     
  less expenditure incurred and allowed in CP3 Nil
    £200,000
  Clawback of provisional allowance CP1 £100,000

Example B

Oil delivered and appropriated as returned:

CP1 - £2m

CP2 - £3m

CP3 - £4m

CP1: Claim of £200,000 under Schedule 6, but no expenditure allowed.

  Provisional allowance for CP1 = 5% x £2m £100,000
     
  less expenditure incurred and allowed in CP1 Nil
    £100,000

CP2: £50,000 of the above Schedule 6 claim is allowed.

  Provisional allowance for CP2 = 5% x £3m £150,000
     
  less expenditure incurred and allowed in CP2 (the expenditure was incurred in CP1) Nil
    £150,000

There is no clawback of any provisional allowance for the last but one preceding period - this is only CP2 - but the OTA75\S2(10)(a) increase for the period has to be calculated. This is the lesser of

a. total Schedule 5 and 6 expenditure allowed in CP2 but incurred in CP1 £50,000
     
  and  
b. 5% provisional allowance (adjusted) for CP1 £100,000
     
  OTA75\S2(10)(a) increase £50,000

CP3: Again a revision is needed

  Provisional allowance for CP3 = 5% x £4m £200,000
     
  less expenditure incurred and allowed in CP3 Nil
    £200,000
  Clawback of provisional allowance CP1 £100,000

There is no OTA75\S2(10)(a) increase as no expenditure incurred in the previous chargeable period (CP2) has been allowed in CP3. But as there was an increase for CP2, OTA75\S(10)(b) is triggered in CP3 to reduce the clawback by the amount of that increase.

  OTA75\S2(10)(b) decrease £50,000
     
  Net clawback £50,000