OT19425 - PRT: Appendices

Interaction of Legislation

The effect of OTA75/SCH3/PARA5 on FA80/SCH17 is as follows. OTA75/SCH3/PARA5(2) does not state that the company with the economic interest must be the participator in the licence, only a participator. Paragraph 5(3), however, states that "where a participator ... is or has been a party" to an illustrative agreement the rights of the licensee company are to be treated as rights of the associated company. The words "is or has been" are consistent with the application of Para5(2) for the whole of the chargeable period in which the illustrative agreement collapses. On the other hand Para5(1) applies where ownership of all or any of a participator’s oil is transferred to another company; wording which envisages the licensee retaining part of the interest in the oil. Thus, despite the very wide words of paragraph 5(3), it is necessary to read Para5(1) as applying only to the oil affected by the illustrative agreement.

The view taken by the OTO is that if the effect of Para5(3) can be so restricted it can also be restricted in time. Therefore, despite the opening words of Para5(2), Para5(3) only applies while the illustrative agreement has effect, charging incomings up to the date of collapse on the X company and thereafter on the licensee company. The Schedule 17 rules will then apply in the usual way on the basis that there was a transfer of field interest on the date of the collapse.