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Web Alert: Welcome relief - UK North Sea tax cuts
News & Insights 30 March 2016
In the budget last week, the UK government announced a number of North Sea Budget measures to assist the oil and gas industry
In the budget last week, the UK government announced a number of North Sea budget measures to assist the oil and gas industry. The sector has come under increasing pressure as extraction costs remain high while at the same time oil prices have slumped to a low. The industry has been calling for bold reforms from the treasury for some time now, and the government has responded with what it calls a 'radical package'
The main highlights are as follows:
- The Petroleum Revenue Tax was effectively abolished having been reduced from 35% to 0%
- The Supplementary Charge has been reduced from 20% to 10%
- A further £20m of funding has been set aside for a second round of seismic surveys in 2016-17
- The availability of decommissioning tax relief where an asset is transferred but the decommissioning liability is retained by the previous owner was clarified
The tax cuts are reportedly worth £1bn. However, some feel that the UK government has not gone far enough as there were calls for exploration and production allowances for the industry in order to help further exploit the mature basin.
It is clear that for some time now the onus has been on the industry to become more efficient, so the latest measures are a welcome contribution from the UK government. It is hoped that the measures will improve competitiveness within the sector, help restore investor confidence and safeguard UK jobs. This is positive news for the UK sector.