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HMRC internal manual

Oil Taxation Manual

Capital gains: extension of ring fence: non material disposals

As an ‘oil field’ is defined as an area, all of which is a licensed area, which has been determined as an oil field in the UK or UK Continental Shelf by the Secretary of State for DECC (or his Northern Ireland equivalent) it does not include prospects not yet determined or foreign fields. Disposals of interests in exploration acreage or prospects (which are not determined fields) or foreign fields are not material disposals.

The transfer of an interest in an oil field is construed in accordance with FA80\Sch17\Para1 and includes disposals of oil field interests other than on the making of an Illustrative Agreement (but not the collapse thereof) or a redetermination under a Unitisation Agreement.

Disposals of assets used within the ring fence which are not connected with the transfer of an interest in a field are not material disposals. Similarly, compensation receipts arising in respect of assets used for ring fence purposes are not within the ring fence rules unless they are associated with the transfer of an interest in a field.