Introduction New section 198J
3.New subsection (1) specifies the assets whose disposal may benefit from the relief. To qualify for the relief, the company making the disposal must be an “E&A company” disposing of “relevant E&A assets”, as those terms are defined in subsection (7). Additionally, the assets disposed of must either be used by the company in an area in which it is licensed to carry out E&A activities (also defined in subsection (7)), or be a licence (or licence interest) relating to an undeveloped area.
4.An “E&A company” is a company engaged in E&A activities outside the oil and gas ring fence (see s277 Corporation Tax Act 2010). The definition of “E&A activities” refers to UK or UK continental shelf “oil and gas exploration and appraisal”, that term being defined at section 1134 Corporation Tax Act 2010. “Relevant E&A assets” are defined in subsection (7) as assets used solely by the company for E&A activities that are within a class of assets listed in section 155 TCGA 1992.
5.New subsection (2) sets out that the relief will be available if the disposal proceeds are reinvested on “E&A expenditure” (defined in subsection (7) as expenditure on E&A activities treated as such under generally accepted accounting practice) whilst the company is an E&A company, or on “oil assets” (as defined in 198E(5) TCGA 1992) for the purposes of the company’s ring fence trade. This definition includes the incurring of exploration, appraisal and development expenditure as provided for by section 198I.  Subsection (2) also specifies that the disposal proceeds must be reinvested within the “permitted reinvestment period” as defined in subsection (5), and sets out that the effect of making a claim for relief is that the gain on the disposal will not be chargeable.
6.New subsections (3) and (4) provide that partial relief is available where only part of the proceeds of the disposal has been reinvested as required by subsection (1).
7.New subsection (5) defines “the permitted reinvestment period”.
8.New subsection (6) specifies that certain existing provisions under roll-over relief for capital gains, modified as necessary, are to be used for the purpose of apportioning consideration, and so calculating the disposal proceeds that may benefit from the relief, where the assets disposed of have not been used only for E&A activities.
9.New subsection (7) defines key terms used in new sections 198J-198L.