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HMRC internal manual

Oil Taxation Manual

From
HM Revenue & Customs
Updated
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Field allowance: transfer of field allowance where the equity share changes

Where a company disposes of all or part of its share in the equity in a field, all or part of the unactivated amount of the field allowance for the field transfers to the transferee.

For the transferor, the unactivated amount is reduced by the fraction:

(E1 - E2)/E1  

where

  • E1 is the transferor’s share of the equity in the field immediately before the disposal, and
  • E2 is the transferor’s share of the equity in the field immediately after the disposal.

The unactivated amount available for a transferee depends on whether the transferee has acquired all or part of the transferred interest.

The unactivated amount which passes to the transferee is given by the formula:

R x E3<u>/</u>(E1 - E2)  

where

  • R is the amount of the reduction determined for the transferor,
  • E3 is the share of the equity in the field that the transferee has acquired from the transferor, and
  • E1 - E2 is (following the meaning above) the share disposed of by the transferor.