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HMRC internal manual

Oil Taxation Manual

Transferable tax history - Onward sales - Opt-out treatment

If the original purchaser and the new purchaser so choose, they may jointly opt out of the treatment described at OT68040, by notifying HMRC of their decision at the time of the subsequent TTH election.

If such an opt out is made, original TTH amounts that are being treated as eligible ring fence profits of the original purchaser are not transferred in preference to the eligible ring fence profits of the purchaser. Instead, the normal LIFO rules apply, and original TTH amounts being treated as eligible ring fence profits are transferred only to the extent that the purchaser has no eligible ring fence profits (whether actual or original TTH amounts being treated as such) of subsequent periods.

Example

Company A sold its 40% interest in field X to company B on 1 January 2021, with TTH of £40m in 2018 and £15m in 2017 and £10m in 2016. B was newly incorporated and field X was its only asset. It made profits of £20m in 2021, £25m in 2022, £20m in 2023 and £60m in 2024. These figures were both its ring fence profits and its tracked profits amounts.

On 1 January 2025 B sold its interest in field X to company C. B and C make a TTH election, and elect for the opt-out treatment. The revised TTH cap for the onward sale is £60m. As a result of the opt-out, B’s eligible ring fence profits are transferred first: £25m in 2022 and £20m for 2021. Only then can the original TTH amounts be transferred to top this up: £15m of the original TTH from 2018 can also be transferred.

To activate the £45m of ‘new’ TTH (that was not the original TTH from the first election), C need only take account of its own tracked profits following of the interest in field X. However, to activate the original TTH, C will also need to take account of B’s tracked profits for the APs from which C’s eligible ring fence profits were transferred (£25m in 2022 and £20m in 2021). C will need to track the activation calculations separately.