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HMRC internal manual

Oil Taxation Manual

PRT: allowable losses - permanent cessation of winning oil

An unrelievable field loss (UFL) is only claimable once the permanent cessation of winning oil from a field has taken place. The same test governs the relief of terminal losses under OTA75\S7(3), see OT16200. The field therefore does not have to have been abandoned or decommissioned and indeed participators may still be receiving income from it, see OT16400.

The question of whether the winning of oil from the field has ceased permanently or merely temporarily is one to be decided on the facts of each particular case. However, as of 1st July 2007, OTA75\S6(4A) provides that the winning of oil from an oil field has not permanently ceased until all the wells in the field have been permanently abandoned. The relevant legislation is at OTA75\Sch8\Para1-3. If, with a view to making a claim for a UFL, a participator considers that the winning of oil from a field has ceased permanently, it must arrange for the Responsible Person to send to the Board a notice under OTA75\Sch8\Para1.

On receipt of the notice the Tax Specialist should write to the Department of Energy & Climate Control (DECC) to seek confirmation of the date on which the winning of oil from the field permanently ceased and advising the reason for the request.

When the Tax specialist is satisfied on the question he should prepare a Draft Letter for signature by the SCS Responsible Officer (acting on behalf of the Board, which is required under OTA75\Sch8\Para2(1) to give notice of its decision). There is no statutory time limit for giving this notice. The Tax Specialist should issue it within a reasonable time limit.

On receipt of the Board’s decision, the Responsible Person is obliged, within one month, to furnish copies of it to all other persons who are or have been participators in the field. The Responsible Person also has the right of appeal against the decision to the First-tier Tribunal within three months of receipt of the notice (OTA75\S8\Para3).

A copy of the Board’s Notice should be retained centrally together with any appeals.