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Oil and gas taxation: decommissioning relief deeds

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The government entered into five new decommissioning relief agreements in 2018/19, bringing to 96 the number of deeds entered into since October 2013. At the end of 2018/19, the government had 92 agreements in force.

These deeds are the government’s contractual approach to providing oil and gas companies with certainty on the level of tax relief they will receive on future decommissioning costs. Oil & Gas UK, the trade association for the industry, estimates these deeds have so far released more than £8.1bn of capital for investment elsewhere.

The government is required to report to Parliament every year on progress with the deeds.

Four payments were made under all deeds up to the end of 2018/19, totalling £94m. One payment of £43.2m (after adjustment) was made as a result of a company defaulting on its decommissioning obligations.

HM Treasury’s 2019/20 accounts will recognise a provision of £285.9m in respect of companies defaulting on their decommissioning obligations, most of which is expected to be realised over the next four years.

Issue: 1482
Categories: News