Section 7A | Reduction of disposal receipts: use giving rise to tax-exempt tariffing receipts ^F1

(1)Where this section applies, the amount or value (apart from this section) of any disposal receipts of the participator (“the disponor”) in respect of the disposal shall be reduced in accordance with the following provisions of this section.^F1

(2)The reduction is to be made by multiplying that amount or value by the fraction that is equal to—1 - T/A^F1

(3)In that formula—T is the aggregate of the tax-exempt tariffing use of the asset in the reference period by—^F1

(a)the disponor, so far as referable to the interest disposed of, and^F1

(b)each of the previous owners, so far as referable to that previous owner’s represented interest, and^F1

(a)the disponor, so far as referable to the interest disposed of, and^F1

(b)each of the previous owners, so far as referable to that previous owner’s represented interest,^F1

A is the aggregate of all use of the asset in the reference period by—but only taking into account for this purpose use of the asset by a person at a time when he is or was a participator in a taxable field.

(4)For the purposes of this section—^F1

(5)Any apportionment that falls to be made for the purpose of determining a previous owner’s represented interest shall be made using a method which is just and reasonable, having regard to—^F1

(a)the proportion of any person’s interest that was acquired from any particular person, and^F1

(b)the proportion of any person’s interest that was transferred to any particular person.^F1

(6)Where—^F1

(a)the disponor or any previous owner acquired the asset or an interest in the asset from another person, and^F1

(b)on that other person’s corresponding disposal of the asset or interest a reduction was made by virtue of this section,^F1

use of the asset shall not be brought into account in determining T or A in the formula in subsection (2) above to the extent that it was so brought into account in relation to that corresponding disposal.

(7)Where paragraph 9 of Schedule 2 to this Act (reduction of disposal receipts in respect of brought-in assets) applies in relation to an asset, no account shall be taken for the purposes of this section of any use of the asset during the initial period.In this subsection “the initial period”, in relation to an asset, has the same meaning as it has in relation to that asset in paragraph 7 of Schedule 1 to this Act (restriction on allowable expenditure on brought-in asset).^F1

(8)For the purposes of this section, the amount of use of an asset—^F1

(a)where the use is in relation to oil, is to be determined by reference to the volume of oil in relation to which the asset is used, and^F1

(b)where the use is otherwise than in relation to oil, is to be determined on a just and reasonable basis.^F1

(9)For the purposes of this section, the extent to which use of an asset is referable to—^F1

(a)the interest disposed of, or^F1

(b)the represented interest of a previous owner,^F1

shall be determined on a just and reasonable basis, having regard to the size of the interest in question and the size from time to time of the whole interest in the asset of the disponor or, as the case may be, that previous owner.