Oil & Gas
Golden Brown?
A The New Brown Field Allowance for Oil and
Gas Companies Jeremy Cape and Andrew Thornton, SNR Denton
The Chancellor of the Exchequer announced a new tax measure aimed at supporting billions of pounds of new investment in older oil and gas fields in the North Sea, increasing tax revenues from the industry.
tax allowance for certain mature fields, known as brown fields, will shield a portion of income from the Supplementary Charge, encouraging companies to invest in getting
the very most out of existing fields and infrastructure in the UK Continental Shelf.
The profits of oil and gas companies in the UK are subject to corporation tax (currently 30%) and a supplemental charge (currently 32%). Certain older fields are also subject to Petroleum Revenue Tax (PRT) at 50%, which was replaced with the supplemental charge for fields that were given development consent on or after 16 March 1993. Any
24
www.finance-monthly.com
company currently subject to PRT is allowed to deduct such PRT paid from its profits when calculating its income for corporation tax purposes.
Overall, the amount of tax on the oil and gas sector is high, and in particular the sector has not benefited from the reduction in the general rate of corporation tax to 24%. The industry has been lobbying for general and targeted measures to ease the tax burden in appropriate cases. The Chancellor had been under pressure from the oil and gas industry to provide incentives after the increase in the supplemental charge to 32% in 2011 (to help fund a sharp decline in the amount of fuel
duty). That announcement, which had not previously been trailed by the Chancellor, had provided a nasty surprise to the industry.
This year's Budget, which contained no nasty surprises for the oil and gas sector (although readers may recall numerous other omnishambles contained therein) announced several measures intended to increase investment in the oil and gas sector in fields that were considered, because of the high tax rates, not to be commercially viable. This included an increase in the small field allowance and an allowance for new large deep water fields (aimed at fields west of Shetland). These measures were provided for
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100 |
Page 101 |
Page 102 |
Page 103 |
Page 104 |
Page 105 |
Page 106 |
Page 107 |
Page 108 |
Page 109 |
Page 110 |
Page 111 |
Page 112