The publication of a UK Treasury paper designed to provoke discussion on North Sea tax relief has been welcomed.
Michael Burns, oil and gas partner at London based law firm Ashurst, said it was reassuring to see the government responding and engaging with the struggling industry.
The paper sets out a number of proposed talking points in relation to the North Sea tax regime.
This includes the mention of the transference of tax history (TTH) in relation to selling old assets to new companies – making field life expansion more financially viable.
Burns said: “Whilst the government notes that it would not be willing to do so where this would present additional exposure to the taxpayer or add further complexity to the deals landscape, it’s very good news that the government is prepared to engage with industry on the challenges faced by sellers and buyers in relation to late-life assets with the potentially huge decommissioning liabilities that are connected to them.
“The possibilities of a potential transferable tax history (TTH) for UKCS assets and a revised regime that makes it easy for those selling upstream assets to sell without retaining decommissioning expenses for an asset and ensure that the buyer receives the related tax benefits of incurring those expenses are definitely positive steps forward for the industry.
“The consultation process will need to address the detailed mechanics together with other issues posed by the concept of a TTH such as taxpayer confidentiality and the question whether an on-transfer of the TTH should be allowed on a subsequent sale.
“However, it’s very much hoped that a package can be introduced by the time of the Autumn Budget.”
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