Commentary

D7.929 Disposals of oil licences

Corporate tax
Corporate tax | Commentary

D7.929 Disposals of oil licences

Corporate tax | Commentary

D7.929 Disposals of oil licences

In addition to the rules detailed at D7.928, the following special provisions apply for the purposes of computing the chargeable gain or allowable loss arising on certain disposals of oil licences. An oil licence for this purpose includes UK licences1 and any foreign oil concession2.

Allowance of certain drilling expenditure etc

Certain expenditure incurred in searching for oil or ascertaining the extent of oil reserves in the licensed area can be deducted in computing the gain or loss arising on the disposal of an oil licence3 provided:

  1.  

    (a)     the expenditure is capital expenditure on research and development which is eligible for capital allowances under CAA 2001, s 441 (see Division B3.7) for a period before the date of the disposal or would have been so eligible if a trade connected with that research had commenced before the disposal4; and

  2.  

    (b)     the disposal of the oil licence must be an occasion of charge under CAA 2001, s 443 (see B3.704) or an event, which would have been an occasion of charge, had trading commenced5. Expenditure is only allowable to the extent that it does not exceed the disposal value that is required to be brought into account under CAA 2001, s 4436.

Where such expenditure has been allowed at a time before the commencement of a trade in computing the chargeable gain or allowable loss on the disposal of an oil licence, relief on the same expenditure cannot be obtained at a later date by way of research

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