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HMRC internal manual

Oil Taxation Manual

Capital Gains: Undeveloped Areas - Disposals at arms-length


TCGA92\S194 applies to any disposal (including a part disposal) of a licence for an undeveloped area made by way of a bargain at arm’s length. The majority of disposals excluded will be intra group transactions having no CG consequences because of the no gain/no loss rules in TCGA92\S171.

The value of the consideration is treated as Nil if, at the time of the disposal, the licence (or interest therein) relates to an undeveloped area to the extent that the consideration consists of:

  1. another licence (or interest therein) which at the time also relates to an undeveloped area or
  2. an obligation to undertake exploration or appraisal work in the area (or part of it) covered by the licence i.e. the work programme obligation.

Subject to rebasing rules for assets held at 31 March 1982, the deemed Nil consideration is effective for all purposes of TCGA and means that, in relation to the acquirer, there is no corresponding allowable expenditure for capital gains purposes on a future disposal for assets held at 31 March 1982.

There is a parallel provision for capital allowance purposes at CAA01\S553.