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HMRC internal manual

Oil Taxation Manual

HM Revenue & Customs
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Capital gains: non residents: meaning of exploration or exploitation activities

Exploration or exploitation activities are defined in TCGA92\S276(2)(a) as

  • activities carried on in connection with the exploration or exploitation of so much of the seabed and subsoil and their natural resources as is situated in the UK or a designated area.

A designated area for this purpose means an area designated by Order in Council under section 1(7) of the Continental Shelf Act 1964. For the purposes of this guidance it is taken as synonymous with the UK Continental Shelf.

The close conjunction of the words ‘seabed and subsoil’ means that only activities which relate to areas in UK territorial waters or the continental shelf are within the definition.

Rights attaching to or deriving from exploration and exploitation activities carried out onshore UK will be within the general charge to tax under TCGA92\S10 where the non-resident is carrying on a trade in the UK through a branch or agency and the rights meet the criteria at OT30805. A charge under TCGA92\S10 is unlikely to arise, however, where a non-resident discovers oil onshore but sells the licence interest before any decision is taken to develop, such that a trade has not commenced at the time of disposal.