The Economic Secretary to the Treasury (Miss Chloe Smith)
At Budget 2012, the Government announced a package of measures on oil and gas taxation to support investment. This package included the introduction of legislation in 2013 giving the Government statutory authority to sign contracts with companies operating in the UK and UK continental shelf (UKCS), to provide assurance on the tax relief they will receive when decommissioning assets.
The Government recognise that, at present, a lack of certainty over how much tax relief companies expect to be able to claim in respect of their future decommissioning costs is making it difficult for oil and gas assets to change hands, limiting the funds available for new ventures and deterring incremental investment.
HM Treasury is today publishing the following document: “Decommissioning Relief Deeds: Increasing tax certainty for oil and gas investment in the UK continental shelf”.
This consultation document seeks views on the Government’s proposals to provide certainty on decommissioning relief through decommissioning relief deeds.
It is proposed that these deeds will provide eligible companies with certainty that, if they do not achieve a specified level of relief under the tax code when they decommission their assets, they will (subject to certain conditions) be entitled to claim a shortfall payment from the Government.
This contractual approach is intended to facilitate further investment and production in the UKCS and is therefore expected to have a positive impact on the Exchequer.
The initial consultation period will last for 12 weeks, closing on 1 October 2012.
A copy of the consultation will be made available from the HM Treasury website: http://www.hm-treasury.gov.uk.