North Sea Oil: Taxation
(asked on 5th December 2018) - View Source
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what sums the Government (a) received in tax revenues from North Sea oil production and (b) paid out in decommissioning-related tax breaks in each of the last three years for which figures are available.
Transferable tax history is forecast to increase tax receipts from oil and gas production by £65m between tax years 2018-19 and 2023-24.
It would therefore be unnecessary to set aside additional funding to implement this policy.
Wider decommissioning tax relief is provided to companies undertaking decommissioning activities through deductions against current or future taxable profits and, in some situations, repayments of previously paid tax.
The UK oil and gas industry is expected to pay an additional £13bn of tax over the next 5 years, net of tax repayments for decommissioning tax relief.
The Government publishes OBR verified forecasts of future tax receipts for the 5 year period up to year 2023/24.
Government internal projections for TTH beyond 2023/24 show it will continue to be revenue positive for the Exchequer.
Para 5 (d) of Schedule 14 to the Finance Bill (No.3) 2017-19 determines the “uplifted decommissioning cost estimate”. This refers to the maximum possible amount of tax history that the seller can transfer to a purchaser under a transferable tax history election. It does not represent the actual tax relief that the purchaser will receive from making a claim for transferable tax history.
The amount of transferable tax history that a purchaser can claim will always be limited to the activated amount of transferable tax history. The activated amount is defined as the extent by which decommissioning costs of the transferred field exceed the tracked profits of the transferred field.
If a purchaser is able to make a claim for transferable tax history they cannot receive a larger repayment than the seller would have received for undertaking the same decommissioning work.
The current estimate of the exchequer’s liability for decommissioning costs is therefore unaffected by the introduction of transferable tax history.
Government tax revenues from North Sea Oil and Gas companies over the last three years are reproduced in the table below. More details can be found in Table 11.11 in the publication “Statistics of Government revenues from UK Oil and Gas production”.
Tax repayments are made to ring-fenced oil and gas companies if the assessment of tax due from an earlier period is revised downwards. This can be the result of many factors, including decommissioning tax relief. Estimates of total tax relief arising from decommissioning expenditure will be published by HMRC in Estimated Costs of Tax Reliefs in early 2019.
| 2015-16 | 2016-17 | 2017-18 |
Total tax revenues (£m) | -2 | -350 | 1,188 |