OT20250 - Corporation tax general: commencement of trade

The date on which a trade commences is a matter of fact. HMRC will take full account of the special features of oil exploration and production activity in determining a date of commencement. HMRC accepts that a petroliferous trade commences as soon as a decision is taken to proceed with the commercial development of a discovery that will lead to production but do not accept that exploration by itself constitutes a trade.

For North Sea operations, it is often suggested that the decision to proceed with the commercial development of a discovery is the same as the decision that commercial development is considered worthwhile. As there may be a gap, sometimes substantial between these two points, HMRC take the view that it is the decision to proceed which triggers the start of the trade.