Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

Oil Taxation Manual

From
HM Revenue & Customs
Updated
, see all updates

Field allowance: overview of the amount available

The amount of the field allowance potentially available depends on the type of field and is also proportionate to the company’s share of the equity in the field.

Where an accounting period is less than 12 months, or a company’s share in the field changes, the field allowance potentially available adjusts proportionately. Much of the legislation exists to provide this proportionality in circumstances where a company acquires or disposes of an interest in a field. The allowance is not prorated by reference to the authorisation day.

The quickest that the field allowance can be accessed is over five years, with a maximum of 20% of the total allowance then available each year. The allowance becomes available in the accounting period that first development authorisation occurs but is only activated when income is generated from the field. For field allowance limitations see OT21430 below.

When a new field or a project in an additionally-developed oil field is authorised the company which is the licensee at authorisation holds a field allowance proportionate to the company’s holding of the equity in the field. The allowance is held as from the beginning of the accounting period in which the authorisation day falls.

Thus, for example, if a company holds 25% of the equity in an ultra heavy oil field it holds a field allowance of £200 million (25% of £800 million).

A company may hold more than one field allowance for a particular field at the same time, eg in respect of a new field and then in respect of an additionally-developed oil field.