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Oil and gas fiscal regime facing ‘radical’ reforms

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Oil and gas fiscal review

The government has proposed ‘radical reforms’ to the oil and gas fiscal regime in a its report titled Driving investment: a plan to reform the oil and gas fiscal regime. This follows recent changes announced in the Autumn Statement, namely:

  • a cut in the rate of the CT supplementary charge from 32% to 30% from 1 January 2015;
  • an extension of the ring fence expenditure supplement from six to ten accounting periods backdated to 5 December 2013; and
  • a new high pressure, high temperature cluster area allowance from 3 December 2014.

Additional measures to be developed during 2015 following the call for evidence held between July and October 2014 include:

  • introduction of a basin-wide 'investment allowance' to reduce the effective tax rate for companies investing in the UK Continental Shelf;
  • financial support for seismic surveys; and
  • discussion of further tax measures with the new Oil and Gas Authority.

These changes together form the government's response to its call for evidence on the oil and gas fiscal regime held between July and October 2014.

Furthermore, legislation in Finance Bill 2015 will introduce a new cluster area allowance for oil and gas exploration. The allowance will exempt profits equal to 62.5% of the qualifying capital expenditure a company incurs in relation to a cluster area on or after 3 December 2014. This measure was announced at Budget 2014 and the government’s response to the subsequent consultation was published on 10 December 2014.

Issue: 1243
Categories: News , Corporate taxes