Section 198J: Oil and gas: reinvestment after pre-trading disposal

This section applies if a company which is an E&A company makes a disposal of, or of the company's interest in, relevant E&A assets and that disposal is—

If—

any gain accruing to the company on the disposal is not a chargeable gain.

If part only of the amount or value of the consideration for the disposal is applied as described in subsection (2)(a)—

If the company makes a claim under this subsection in relation to the disposal, the company is to be treated for the purposes of this Act as if the amount of the gain accruing on the disposal were reduced to the amount of the part mentioned in subsection (3)(b) (and, if not all chargeable gain, with a proportionate reduction in the amount of the chargeable gain).

The incurring of expenditure is within "the permitted reinvestment period" if the expenditure is incurred in the period beginning 12 months before and ending 3 years after the disposal, or at such earlier or later time as the Commissioners for Her Majesty's Revenue and Customs may by notice allow.

Subsections (6), (7), (10) and (11) of section 152 apply for the purposes of this section as they apply for the purposes of section 152, except that—

In this section—

• "E&A activities" means oil and gas exploration and appraisal in the United Kingdom or an area designated by Order in Council under section 1(7) of the Continental Shelf Act 1964;

• "E&A company" means a company which carries on E&A activities and does not carry on a ring fence trade;

• "E&A expenditure" means expenditure on E&A activities which is treated as such under generally accepted accounting practice;

• "oil asset" has the same meaning as in section 198E, and section 198I applies for the purposes of this section as it applies for the purposes of section 198E;

• "relevant E&A assets" means assets which—

  (a)are used, and used only, for the purposes of E&A activities carried on by the company throughout the period of ownership, and

  (b)are within the classes of assets listed in section 155 (with references to "the trade" in that section being read as references to the E&A activities);

• "ring fence trade" has the meaning given by section 277 of CTA 2010;

• "UK licence" means a licence within the meaning of Part 1 of the Oil Taxation Act 1975;

and a reference to a UK licence which relates to an undeveloped area has the same meaning as in section 194 (see section 196).