OT30506 | Capital gains: unitisations: reimbursement of historic cost

The LB Oil & Gas approach to the payments which are reimbursement of historic costs incurred on exploration, drilling, wells and (for redeterminations) particularly platforms, and so on, is as follows.

Apportion the costs between the various unit assets, expenditures, and so on. Unitisation agreements will usually have a schedule showing the make-up of the reimbursable amounts.

For decreasing interest parties they are brought in as disposal values (for capital allowances) or trading receipts (SRA/R&D recoveries and intangible drilling costs) in the year redetermination is agreed, to reflect the original purpose and treatment of the expenditure.

The increasing interest parties will be able to claim capital allowances or a revenue deduction as appropriate on their payments.