Decommissioning Relief Deeds

Jane Ellison Excerpts

Tuesday 20th December 2016 Written Statements

[The Financial Secretary to the Treasury (Jane Ellison)]

At Budget 2013, the Government announced they would begin signing decommissioning relief deeds. These deeds represent a new contractual approach to provide oil and gas companies with certainty on the level of tax relief they will receive on future decommissioning costs.

Since October 2013, the Government have entered into 76 decommissioning relief deeds. Oil & Gas UK estimates that these deeds have so far unlocked more than £5.9 billion of capital, which can now be invested elsewhere.

The Government committed to report to Parliament every year on progress with the deeds. The report for financial year 2015-16 is provided below.

The number of decommissioning relief agreements entered into: the Government entered into no decommissioning relief agreements in 2015-16.

The total number of decommissioning relief agreements in force at the end of that year: 72 decommissioning relief agreements were in force at the end of the year.

The number of payments made under any decommissioning relief agreements during that year, and the amount of each payment: no payments were made under any decommissioning relief agreements in 2015-16.

The total number of payments that have been made under any decommissioning relief agreements as at the end of that year, and the total amount of those payments: no payments had been made under any decommissioning relief agreement as at the end of the 2015-16 financial year.

An estimate of the maximum amount liable to be paid under any decommissioning relief agreements: the Government have not made any changes to the tax regime that would generate a liability to be paid under any decommissioning relief agreements. HM Treasury’s 2015-16 accounts recognise a provision of an aggregate £327 million in respect of decommissioning expenditure incurred as a result of a company defaulting on their decommissioning obligations. The majority of this is expected to be realised over the next five years.

[HCWS393]