Video – UK Cuts Taxes For Offshore Oil And Gas Industry

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The UK cuts taxes for the offshore oil and gas industry as part of government budgetary changes announced by the UK Chancellor George Osbourne.

The changes were announced to the UK parliament by the Chancellor of the Exchequer, George Osbourne, Wednesday.

A statement released by the UK Treasury read: ‘This radical package will ensure the UK has one of the most competitive tax regimes for oil and gas in the world.’

UK Cuts Taxes For Offshore Industry

The changes amount to tax support for the industry worth around GB£1 billion (US$1.4 bn), and will effectively see the abolition of the current ‘Petroleum Revenue Tax’ (PRT), according to the Chancellor.

The budget also commits the UK government to provide an additional GB£20 million (US$28.5m) of funding for further seismic surveys during 2016 – 2017.

Tax cuts for announced include:

PRT, a tax on profits from oil fields in place since 1993, will be cut from 50% to 35%.

The existing ‘Supplementary Charge’, on oil and gas extraction, will also be cut from 20% to 10% and backdated to 1 January 2016.

In his statement the Chancellor said: “We’re also going to help one of the most important and valued industries in our United Kingdom that has been severely affected by global events.”

“The Oil and Gas sector employs hundreds of thousands of people in Scotland and across our country.”

“In my Budget a year ago, I made major reductions to their taxes. But the oil price has continued to fall. So we need to act now for the long term.”

“I am today cutting in half the Supplementary Charge on oil and gas from 20% to 10%. And I’m effectively abolishing Petroleum Revenue Tax too.”

“Both of these major tax cuts will be backdated so they are effective from the 1st of January this year, and my HF [Honourable Friend] the Exchequer Secretary will work with the industry to give them our full support.”

The UK Chancellor’s Speech On The Oil & Gas Sector



Further Support For UK Offshore

A statement by the UK treasury read: ‘The government believes in making the most of the UK’s oil and gas resources.’

‘The oil and gas industry delivers significant economic benefits, supports hundreds of thousands of jobs and supplies a large portion of the nation’s primary energy needs.’

‘Budget 2016 delivers the next stage of the government’s plan to ensure the fiscal regime supports the objective of maximising economic recovery while obtaining a fair return on the nation’s resources.’

The government will:

Effectively abolish Petroleum Revenue Tax by permanently reducing the rate from 35% to 0%,141 to simplify the regime for investors and level the playing field between investment opportunities in older fields and infrastructure and new developments. The change will take effect from 1 January 2016.

Reduce the Supplementary Charge from 20% to 10%, to send a strong signal that the UK is open for business and in recognition of the exceptionally challenging conditions that are currently facing the sector. The change will take effect from 1 January 2016.

Provide a further £20 million of funding for a second round of seismic surveys in 2016‑17, as announced by the Prime Minister in January, to build on the success of the seismic programme in 2015 and encourage exploration in under-explored areas of the UKCS.

Extend the Investment and Cluster Area Allowances to include tariff income, in order to encourage investment in key infrastructure maintained for the benefit of third parties.

Provide certainty that companies will be able to access tax relief on their costs when they retain decommissioning liabilities for an asset after a sale, to encourage new entrants for late-life assets and the development of late-life business models.

Build on the new decommissioning powers of the Oil and Gas Authority (OGA) by undertaking further work with the OGA and industry to reduce overall decommissioning costs, to deliver significant savings for industry and the Exchequer. If significant progress can be made, the government will explore whether decommissioning tax relief could better encourage transfers of late-life assets.

The statement concluded saying: ‘This radical package will ensure the UK has one of the most competitive tax regimes for oil and gas in the world, supporting jobs and investment and safeguarding the future of this vital national asset.’