§ Mr. Tinnasked the Chancellor of the Exchequer how the Inland Revenue will be able to determine an 540W appropriate price formula for the valuation of ethane under clause 129 of the Finance Bill in the absence of directly comparable arm's length deals.
§ Mr. WakehamThe Revenue has information about a number of arm's length contracts in the United Kingdom and Europe involving ethane. They range from specifications containing methane with a small proportion of ethane to ethane with a fairly substantial proportion of propane. They are long-term contracts with a price formula involving a base price and an appropriate escalator. The information available also shows that the base price and escalator can vary considerably according to the volume, situation and specification of the gas and the timing of the deal. The Inland Revenue has no information on arm's length contracts for pure ethane, but there is no reason to believe that these would take a different form from contracts for mixed streams.
In addition to information relative to arm's length deals, the Inland Revenue will also look at all available information—including advice from other Government Departments—on the alternative markets for the gas concerned at the appropriate time—whether for fuel or petrochemical use—and on what arm's length purchasers would be prepared to pay in these markets.
The issues of valuation which arise on the clause are in principle similar to those that already arise under the rules to which the clause offers an alternative.