CALCULATION OF CAPITAL ALLOWANCE IN PETROLEUM OPERATIONS

Step 1

For each separate petroleum operation, identify the written down value of capital expenditure for the 2015 year of assessment.

Step 2

Calculate capital allowance in accordance with Pat II of the Third Schedule of The Act.

Step 3

Any additions in the year should be placed in a separate pool and capital allowance granted.

Step 4

Where an asset is disposed off in any year of assessment in respect of a separate petroleum operation, the consideration received shall be added to the income of that separate petroleum operation.

Step 5

Where an asset is partly used in different separate petroleum operations, capital allowance shall be computed on that asset and apportioned in proportion to the use of the asset in each separate petroleum operation.

Step 6

Where in a year of assessment, a petroleum right is assigned, the written down value of the capital allowance expenditure of the assignor shall be transferred to the assignee.

Step 7

Where in a year of assessment, part of a petroleum right is assigned, the written down value shall be apportioned between the assignor and the assignee in proportion to the percentage of the interest retained and the percentage of the interest assigned.