BP Oil Development Ltd v Commissioners of Inland Revenue
| Jurisdiction | England & Wales |
| Judgment Date | 11 July 1990 |
| Date | 11 July 1990 |
| Court | Court of Appeal (Civil Division) |
Court of Appeal (Civil Division).
Dillon, Butler-Sloss and Staughton L JJ.
Mr Peter Whiteman QC and Miss Marion Simmons (instructed by the group legal adviser) for BP.
Mr Alan Moses QC (instructed by the Solicitor of Inland Revenue) for the Crown.
Petroleum revenue tax - Tariff receipts allowance - Oil company operating in North Sea - Tariff receipts earned from use of assets for transporting, processing and storing oil and gas for consortium operating neighbouring oil field - Whether one allowance for all receipts from a particular user field or separate allowances in respect of receipts relating to each facility afforded - Oil Taxation Act 1983 section 9 subsec-or-para (1) section 9 subsec-or-para (6)Oil Taxation Act 1983, sec. 9(1), (6).
This was an appeal by the Crown against a judgment of Vinelott J ([1988] BTC 8079), allowing an appeal from the decision of a special commissioner, that the tariff receipts allowance under theOil Taxation Act 1983 section 9 subsec-or-para (1)Oil Taxation Act 1983, sec. 9(1), available against payments received by the taxpayer company ("BP") for the use of its assets and facilities by another company operating in the North Sea, was to be given in respect of tariff receipts paid for each facility afforded rather than once only in respect of all receipts from the user field concerned.
BP owned the Forties Field in the North Sea about 100 miles from the Scottish coast. The assets of the field included a pipeline which ran from the field to the coast at Cruden Bay and then across the country to the taxpayer's processing plant and temporary storage facilities at the Kerse of Kinneil.
The Brae Field, owned by a group led by Marathon, was some 70 miles north of the Forties Field. A pipeline owned by the Marathon group ran from Brae to Forties where it connected to BP's pipeline to Scotland.
By an agreement effective from June 1980, BP agreed with Marathon to transport oil and to transport and process gas from the Brae Field. The charge for transporting the pipeline liquids to Scotland separating them into oil and gas, temporary storage, and delivery to a shipping terminal was 50p per barrel (seven barrels were approximately equal to one tonne) while the charge for processing the gas, storage and delivery was £14.50 per tonne of raw gas. A further process known as "sweetening" of dry gas and propane was charged at 10p per barrel of the original amount.
Originally under the Oil Taxation Act 1975 payments received for transporting, storage and processing pipeline liquids for another operator, known as "tariff receipts", were excluded from the charge to petroleum revenue tax, but they were brought into charge by theOil Taxation Act 1983 section 6Oil Taxation Act 1983, sec. 6 to the extent that they related to the use of, or the provision of facilities in connection with, a "qualifying asset". The qualification of the asset was linked to the allowance of expenditure under the Oil Taxation Act 1975.
An allowance, "tariff receipts allowance", was introduced byOil Taxation Act 1983 section 9sec. 9 of the 1983 Act. The cash equivalent of a specific metric tonnage of oil, calculated by a formula set out in Oil Taxation Act 1983 schedule 3 subsec-or-para 2Sch. 3, para. 2(1), was excluded from the charge. The allowance was granted to the participator in a principal field, in this case the Forties Field, in respect of each user field, in this case the Brae Field, which made a qualifying use of qualifying assets of the principal field.
The issue was whether BP was entitled to a single allowance only in respect of each user field calculated by reference to the aggregate of the tariff receipts from the user field in a particular accounting period in respect of any qualifying assets used, or whether the allowance was so linked to assets that there was to be a separate allowance in respect of each facility or asset for which a separate charge was made.
BP contended that Oil Taxation Act 1983 schedule 3 subsec-or-para 2Sch. 3, para. 2 linked any given amount of qualifying tariff receipts to the specific amount of oil to which those receipts related, and to the asset, by means of which that oil was extracted, transported, treated or stored and from which, therefore, those tariff receipts were derived (see Oil Taxation Act 1983 section 9 subsec-or-para (6) section 9 subsec-or-para (6)sec. 9(6)(a) and (b)). That linkage of the tariff receipts to the asset for the use of which the tariff was charged showed that the allowance was to be given in respect of the cash equivalent of oil extracted, transported, treated or stored by means of each asset. BP also contended that the Crown's interpretation would produce the anomaly that a contract for treating a small amount of oil at a high price would bear a disproportionate amount of tax in relation to a contract involving a large amount of oil treated at a low price.
Held, allowing the Crown's appeal:
1. The crucial provision was Oil Taxation Act 1983 section 9 subsec-or-para (1)sec. 9(1) of the 1983 Act, with or withoutOil Taxation Act 1983 section 9 subsec-or-para (6) section 9 subsec-or-para (6)sec. 9(6)(a) and (b), not the formula set out in Oil Taxation Act 1983 schedule 3 subsec-or-para 2Sch. 3, para. 2(1) by which the allowance was to be calculated. The natural meaning of "qualifying tariff receipts" in Oil Taxation Act 1983 section 9 subsec-or-para (1)sec. 9(1) was the aggregate amount received from each user field, not the amount received from each user in respect of each separate qualifying asset. There was nothing in Oil Taxation Act 1983 section 9 subsec-or-para (6) section 9 subsec-or-para (6)sec. 9(6)(a) and (b) to override the words, "qualifying tariff receipts received or receivable … from a user field" in Oil Taxation Act 1983 section 9 subsec-or-para (1)sec. 9(1).
2. Oil Taxation Act 1983 section 9 subsec-or-para (1)Section 9(1) was clear and unambiguous. It was not therefore permissible to have recourse to any anomalies suggested by BP to override the obvious construction of a provision which was not ambiguous.
By a notice of appeal dated 16 December 1988 the Crown appealed against a decision of Vinelott J given on 29 July 1988. The grounds of appeal were:
1. The judge erred in law in his construction of Oil Taxation Act 1983 section 9 schedule 3sec. 9 and Sch. 3 to the Oil Taxation Act 1983 in that he held that tariff receipts allowances fell to be calculated by reference to the amount of oil subjected to a particular process or accorded a particular facility.
2. Accordingly the judge erred in holding that BP was entitled to two tariff receipts allowances in relation to qualifying tariff receipts from the Brae Field because pipeline liquid had been transported and separated and a proportion of the same liquid had, as raw gas, been processed.
3. The judge erred in deciding that the formula in Oil Taxation Act 1983 schedule 3 subsec-or-para 2Sch. 3, para. 2 could be applied separately to each tranche of tariff receipts derived from the use of a particular asset or from the provision of a particular facility.
4. The judge erred because:
(2) There was no necessity or warrant in the legislation for separating qualifying tariff receipts according to the individual assets from which the qualifying tariff receipts were derived (or according to the particular processes to which the pipeline liquids are subject) for the purpose of determining the appropriate tariff receipts allowance.
(3) The legislation provided for one tariff receipts allowance per user field in a chargeable period (see Oil Taxation Act 1983 section 9 subsec-or-para (2) section 9 subsec-or-para (1)sec. 9(2) and (1)) and, save as specifically provided, for one calculation of the cash equivalent of the tariff receipts allowance per user field in a chargeable period.
(4) The special commissioner correctly identified two further provisions, namelyOil Taxation Act 1983 schedule 1 subsec-or-para 2Sch. 1, para. 2 to the Oil Taxation Act 1983 and Oil Taxation Act 1983 schedule 3 subsec-or-para 6Sch. 3, para. 6 to that Act, which support the Crown's contention that there is normally only one tariff receipts allowance per user field in a chargeable period.
(5) BP's contention can give rise to anomalous results in cases whereOil Taxation Act 1983 schedule 3 subsec-or-para 3Sch. 3, para. 3 falls to be applied.
Dillon LJ: This is an appeal by the Crown against a decision ofVinelott J of 29 July 1988 ([1988] BTC 8079) which allowed an appeal of the taxpayer against a decision of one of the special commissioners of income tax, Mr O'Brien. The proceedings concern the liability of the taxpayer, BP Oil Development Ltd, to petroleum revenue tax and in particular the taxpayer's entitlement in reduction of that liability to tariff receipts allowance, which arises under Oil Taxation Act 1983 section 9sec. 9 of and Oil Taxation Act 1983 schedule 3Sch. 3 to the Oil Taxation Act1983.
The case was decided on an agreed statement of facts with no oral evidence. The relevant facts can be shortly stated. The judge took them from the special commissioner's decision and I do likewise.
BP owns the Forties Field, which is in the North Sea about 100 miles east of the Scottish coast. The assets of that field include (principally) a pipeline which runs from the field itself to the coast at Cruden Bay, north of Aberdeen, and thence across country to the Kerse of Kinneil, which is on the Firth of Forth, west of Edinburgh; and processing plant at Kinneil. In addition, there are, in the neighbourhood of the Kerse of Kinneil, temporary storage facilities (for both oil and gas) and terminals at which products are delivered (and, I assume, the means of transporting products between the processing plant and the delivery points, via storage). Some 70 miles north of the Forties Field there lies the Brae Field, owned by a group...
To continue reading
Request your trial
-
BP Oil Development Ltd v Commissioners of Inland Revenue
...against his decision was upheld by Vinelott J. ( 1989 S.T.C. 213). The Crown thereafter successfully appealed to the Court of Appeal ( 1990 S.T.C. 632). The facts were agreed and are set out in the following passage from the Special Commissioner's decision: "BP owns the Forties Field, which......
-
Chevron U.K. Ltd v Commissioners of Inland Revenue
...for the Crown. The following cases were referred to in the judgment: BP Oil Development Ltd v IR Commrs TAXTAXTAX[1988] BTC 8079 (ChD); [1990] BTC 8082 (CA); [1992] BTC 8003 (HL) Luke v IR Commrs ELR[1963] AC 557 O'Rourke (HMIT) v Binks TAX[1991] BTC 326 Ramsay (WT) Ltd v IR Commrs ELR[1982......