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HMRC internal manual

Oil Taxation Manual

HM Revenue & Customs
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Capital gains: extension of ring fence: assets used in connection with oil fields - disposals made before 22 April 2009


Restrictions apply on rollover relief for gains on assets within the specified classes (for example fixed plant or machinery) which arise from disposals of oil field interests and related assets within TCGA92\S197. Such disposals are termed ‘material disposals’. Care needs to be taken since the disposal of an asset such as plant used in a field, without any disposal of an interest in a field, will not constitute a material disposal under TCGA92\S197.

The provisions at TCGA92\S198 apply to material disposals and act in three ways:

  1. TCGA92\S152 or TCGA92\S153 cannot apply unless the new asset is taken into use, and used only for the purposes of the ring fence trade as defined in ICTA88\S492.
  2. If the company is a member of a group of companies to which TCGA92\S175 would apply (that is, deeming those companies to carry on a single trade) the gain on the material disposal can only be rolled over against replacement assets used by companies within the ring fence for their ring fence trades.
  3. The new asset is deemed to be a depreciating asset in the ring fence trade such that TCGA92\S154 applies with the necessary modifications. Accordingly, the gain is held over until the earliest of:
* disposal of the new asset or, 
* cessation of use of the new asset for the ring fence trade or, 
* ten years from the acquisition of the new asset. 

The rules are amended for disposals made on or after 22 April 2009 (see OT30472).