The UK Chancellor said today that transferable tax history will be introduced for the oil and gas sector in one year.
Philip Hammond said during the Budget that the “innovative” tax policy would encourage new entrants to the North Sea and attract fresh investment.
North Sea industry leaders have repeatedly called for the UK Government to allow tax credits to be transferred to the new owner when an asset is sold.
The step would let buyers reclaim a portion of the decommissioning costs.
The reform is intended to make mature oil and gas fields more attractive to aspiring North Sea companies.
They would bring fresh investment to a basin which has been hit hard by low oil prices.
In March, Mr Hammond said an expert panel would consider reforming the system, and that its findings would be reported in the Autumn Budget.
Today, Mr Hammond said the changes would be in place in November 2018.
Derek Leith, head of oil and gas at EY, said the move was “very significant” and that it should increase demand for mature assets in the North Sea.
Mr Leith said changing the current system was a complex matter and that it came as “no surprise” that the introduction of the reforms had been deferred for a year
Industry body Oil and Gas UK has said the measure could prolong the life of mature fields by many years and save the Treasury an average of £10million per asset in deferred tax relief.
Andrew Benitz, chief executive of Jersey Oil and Gas, a London-listed firm with North Sea assets, said: “Decommissioning is a significant factor when deciding whether to invest in the North Sea and the ability to transfer tax history for oil and gas fields is a welcome first step to help address this concern. There is plenty of life left in the North Sea yet.”
Mark Routh, chief executive of Independent Oil and Gas, said: “We welcome this new innovative tax policy which is precisely what a mature oil and gas province such as the North Sea needs to stimulate deals, increase activity and therefore achieve higher production and revenue from the sector.”
Russell Borthwick, chief executive of Aberdeen & Grampian Chamber of Commerce, said: “This is something that a number of our members, our regional MPs and industry partners have been asking for and the Chancellor has responded. This measure is key to allowing the industry to maximise the future economic benefit it will deliver to the UK; getting the assets in the North Sea in the right hands will enable that to happen.
“The finer detail of the tax changes will no doubt come in time given the proposed introduction is not until November 2018. Last year we asked Government to stick to its plan to ensure taxation policy enables the UK Continental Shelf to remain globally competitive to attract investment and this appears another step in the right direction.”
Ross Thomson, Scottish Conservative MP for Aberdeen South, said: “Since the election in June, we have lobbied the Chancellor to ensure that this Conservative government continues its unprecedented record of support for the oil and gas industry.
“This is evidence of the new team of Scottish Conservative MPs doing exactly what we said we would do – delivering for the north-east.”
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