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HMRC internal manual

Oil Taxation Manual

Capital gains: unitisations: an outline of unitisation agreements

Unitisation agreements will normally provide the framework for the sharing of oil won between the licence groups, including periodic redeterminations of the shares, and for the adjustment of expenditure to bring it into line with oil entitlement.

While the terms of each agreement need to be studied carefully, it has been noted that there is normally no disposal of rights to oil under a unitisation during the early stages of development. Rather, it is an occasion on which the extent of the rights and obligations of each licence group member is restated by reference to the unit area (that is, the field) and when the group as a whole determine how the rights are to be exploited.

If unitisation occurs later in field life and the agreement contains terms as to recognition of, and compensation for, rights and obligations under the licence, a disposal of an interest in the licence may occur depending on the precise terms involved.

Unitisation Agreements are often complex documents and in considering any taxation implications appropriate weight and attention must be given to the particular terms and wording.