U.K. COURT RULES AGAINST RTZ ON OIL FIELD COSTS
The U.K. High Court dismissed an appeal
by Rio Tinto-Zinc Corp Plc's <RTZL.L> RTZ Oil and Gas Ltd unit
and ruled that the financial provisions a company makes for the
future cost of abandoning an oil field are not tax deductible,
the Press Association reported.
    The company was appealing against a decision of the Tax
Commissioners that any such provision was a capital
expenditure, not a revenue expenditure, and was not deductible.
The court was told that since 1976 the company had made an
annual provision of around 750,000 stg for the eventual cost of
abandoning a rig.
    An RTZ spokesman said the ruling was not worrying as the
subsidiary had assumed that the provisions were not deductible
from corporation tax payable.
    It would have been a bonus if the company had won but all
budgeting had been on the assumption that it would not, he
said.
    Oil analysts said that RTZ's assumption of liability was
shared by the industry as a whole.
    The ruling appeared to mean that tax relief on the
expensive process of abandoning rigs would apply when the
expense occurred, not when provisions for future expenses were
built into the accounts, one analyst added.
 Reuter
