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Chapter OT05362

Document Cited authorities 1 Cited in Related
Vincent
Published date13 March 2016
Record NumberOT05362
CourtHM Revenue & Customs
IssuerHM Revenue & Customs

OTA 1975 made no special provision for the valuation of gas and the basic rule designed for oil (monthly values) applied. At the time however the point was not material as most of the gas produced was sold to British Gas Corporation and there were few non-arms length disposals to value.

The issue first became important in connection with ethane used for petrochemical purposes and this led to the election legislation in FA82\S134 and FA82\SCH18. Under these provisions a participator could elect for ethane used for such purposes to be valued on a long term basis by reference to a formula he proposed instead of being valued on a short term basis under OTA75\SCH3\PARA2. Under the election the participator identified the gas covered, the period of the election (which could be up to 15 years) and the formula (usually a base price plus escalator) to be used to establish the market values. The Board accepted the election if it was satisfied that the formula proposed gave values which were, over the period of the election, not materially different from the prices which would have been obtained in an arm’s length contract for the sale of the ethane in question. The ethane was then valued accordingly and companies obtained the certainty that was absent in the monthly valuation methodology.

The legislation was challenged in a judicial review brought by ICI (Regina v Attorney General ex parte Imperial Chemical Industries Plc 60TC1, [1987]1CMLR72...

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