The UK Treasury has moved the launch of an investment allowance consultation forward after calls were made by the oil and gas industry.
The Chief Secretary to the Treasury and Danny Alexander and the Exchequer Secretary made the announcement following a meeting in Edinburgh.
The allowance, which was first announced in the Autumn Statement, is a single, basin-wide capital expenditure linked investment allowance.
The government said the new allowance is likely to reduce the effective take rate to 45-50% for companies investing in the future of the North Sea.
The consultation will seek views from industry on how the allowance can best support investment in North Sea oil and gas projects.
Danny Alexander, Chief Secretary to the Treasury, said: These are difficult times for Scotland’s oil and gas industry, which is why I announced an ambitious package to support this hugely valuable sector at last month’s Autumn Statement.
“And it’s why I am meeting industry representatives here today, to see how we can support them further, and announcing today that we are fast-tracking consultation on an investment allowance, which industry has told us will incentivise investment opportunities in new and existing fields across the North Sea.
“We will take action on oil and gas to help the industry at Budget.
“Oil prices are inherently volatile, that is why it is important that we take a long term view on the issue: supporting the industry through encouraging investment and protecting the UK’s public finances through a sustainable tax regime, while ensuring that the 375,000 livelihoods that depend on the UK’s oil industry are protected for many years to come.
“The industry – and its workers – have ridden many storms, and with the continued support of the government and the Oil and Gas Authority we are confident that it will emerge from this one with renewed vigour.
“This kind of support is only possible because we can draw on the combined strength and resources of the United Kingdom.
The government will publish a summary of responses to the consultation later this year and legislation will be brought forward in an appropriate finance bill.
The consultation is expected to last around five weeks.
In his Autumn Statement, Chancellor George Osborne announced a series of tax measures for the oil and gas sector.
They included plans to cut a supplementary charge on oil firms’ profits from 32% to 30%.
Derek Leith, UK head of oil and gas taxation at EY and the firm’s Aberdeen office managing partner,said: “If the oil and gas industry had produced a wish list of measures it would like to see introduced in the wake of the Autumn Statement then a new investment allowance would have been near the top.
“This could lead to the most significantly positive oil and gas fiscal change since 1993, and the Chancellor in expediting the consultation process demonstrates the new macro-economic perspective from which the Government is viewing the UK Continental Shelf.
“There were clear signs, even when oil was sitting at $115 a barrel, that the North Sea fiscal regime was no longer fit for purpose.
“A new investment allowance is significant step towards simplification and is likely to encourage investment in the basin.
“It’s another indication that the Government is now focused on creating an environment that enables the UK industry to confidently compete globally for capital.
“In saying that, the immediate response from industry may be lukewarm. There are increasing concerns that the oil price could remain at $50 or less for some time and pressure has been growing on the Government to introduce a further reduction in the tax rate.
“There have been numerous calls for the complete reversal of the ill-conceived increase of 2011 as the bare minimum, and the Chancellor still has the opportunity to make that change in the Budget on 18 March.”
For more oil and has news click here.
Recommended for you
