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HMRC internal manual

Oil Taxation Manual

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HM Revenue & Customs
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Capital Allowances: Research and Development Allowances: Commencement of Trade

Exploration does not by itself constitute a petroliferous trade. The sale of a small quantity of oil, produced as a by product of exploration, does not represent commencement. A trade is considered to commence when a decision is taken to start commercial development. In principle it is possible for the RDA cut off date - the date on which hydrocarbons are decided to be commercial - to occur before the date of a decision to actually start commercial production. See OT20250.

A company engaged in exploration and appraisal may acquire a source of production. The same criteria that are applied for all other purposes of the Taxes Acts in determining whether a trade is in existence, will be applied in reviewing the particular detailed facts, and in deciding whether the exploration and appraisal activities and the separate source of production constitute a trade which has commenced.