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Next steps for the oil and gas fiscal regime

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Following the completion of the Wood Review, and while the Oil and Gas Authority is being established, the government is consulting until 3 October 2014 on the long-term future of the fiscal regime in the context of a maturing basin which will render oil and gas extraction more costly. Part of the purpose of the review is to reach an understanding with industry on those areas where tax changes could have the greatest impact on the objective of maximising economic recovery.

The government will however not be looking at abandoning the UK’s current system, which is based on taxation of ringfenced profits, in favour of a radically different alternative such as the production sharing approaches adopted by some countries.

The government will publish an initial report alongside Autumn Statement 2014 which will:

  • assess the competitiveness of the regime and the case for reform;
  • identify how the tax regime can best work alongside the new approach to regulation recommended in the Wood Review to help maximise economic recovery;
  • set out how the regime can provide stability and certainty for the long term, and propose a timeframe or roadmap for making any changes; and
  • identify whether fiscal support in the form of allowances is being targeted effectively, and options for reform.