Incentives for oil but tax take rises
28 Mar 08
The Budget did not include any windfall tax for the North Sea
Despite the temptation to cash in on record high oil prices, the Budget did not include any windfall tax for the North Sea. There are a number of measures intended to, as Alistair Darling put it: “incentivise investment and support production.”
The measures are aimed at streamlining tax for oil and gas producers, and will also make it easier to offset the cost of scrapping assets at the end of their life.
Martin Findlay, KPMG’s head of oil and gas tax in Aberdeen, commented: “The industry will obviously welcome measures in the Budget that lead to a simplification of the petroleum revenue tax regime, enhanced relief for decommissioning expenditure and incentives to maximise production. But the Government has stopped the offset of investment costs against UK oil and gas profits. In doing so the Chancellor expects to raise an additional £150m per year.”
Findlay warned: “There is still some way to go before we can be happy that the North Sea basin will achieve its maximum potential. Some of that depends on producer behaviour and on the emergence of further new entrants upstream.
“There is a real industry concern that unexploited fields may remain untapped. With related infrastructure being decommissioned prematurely, it would be almost impossible to ever realise the value from the oil and gas yet to be extracted.”