§ Mr. Viggersasked the Chancellor of the Exchequer if he is satisfied with the operation of the expenditure reliefs for petroleum revenue tax; and if he will make a statement.
§ Mr. Peter ReesThe PRT expenditure reliefs are kept under review and in the course of this review so-called "contractor-financing" contracts for major North Sea installations have come to our notice. By contrast with normal contracts in this field—which usually provide for stage payments in step with work done—these contracts provide for a single payment to the contractor on completion or for substantially smaller stage payments than would normally be the case. Contractor-financing has been publicised as an arrangement which might allow oil companies to secure a measure of expenditure relief—and perhaps uplift on
524Wthat relief—which was never intended under the PRT system. The Government would regard it as against the declared intention of the PRT legislation if greater relief were to be secured because contracts for the construction of oil field installations were made on this basis at variance with normal commercial practice in the industry. The Inland Revenue does not concede that companies entering into such contracts will necessarily be entitled to unrestricted relief for their payments under existing law. This must depend on the precise terms and circumstances of each contract. I have, however, asked the Inland Revenue to investigate "contractor-financing" and to consider, in consultation with the oil industry, what action may be required to put the matter beyond doubt. The Government will, if necessary, be prepared to introduce legislation in next year's Finance Bill to amend the PRT treatment of expenditure incurred under 525W contracts of this kind signed after today. In that event, I would propose to publish draft clauses for comment in advance of next year's Bill.