OT30081 - Capital Gains

Computational Points. Earn-Ins.

On an earn-in, any reimbursement of exploration or appraisal expenditure incurred before the date of the earn-in agreement is outside the scope of TCGA92\s194(2)(b). The reimbursement should therefore be treated as cash consideration for the licence interest acquired.

From the date of the earn-in agreement, the earner-in will bear a share of costs proportionate to his acquired interest only, not the retained interest of the earner-out. It should be accepted therefore that this does not represent consideration given by the earner-in in respect of the licence disposal by the earner-out, notwithstanding that, for CG purposes, the date of disposal may be later e.g. when the Secretary of State consents to the assignment.