The Chancellor’s pledge to reform oil and gas tax law could help revitalise the North Sea, an industry tax expert said.
For months, industry leaders and politicians have been calling for the chancellor to allow decommissioning tax relief to be transferred to the new owner when an asset is sold.
They said the reform would make it easier to sell oil and gas fields and attract badly needed new investment to the North Sea, which has been hit hard by low oil prices.
Yesterday, Chancellor Philip Hammond said transferable tax history would be introduced for the oil and gas sector in November 2018.
Derek Leith, EY’s head of oil and gas tax, said: “Today’s announcement by the Chancellor represents an unprecedented change to UK oil and gas tax law and is a clear demonstration that the government wishes to maximise the value of the UK’s remaining hydrocarbon reserves.
“The proposed changes, the details of which will be worked through in 2018, have the potential to revitalise the UK oil and gas industry.
“They will enable the current owners of mature producing fields to pass some of the corporate tax history of the current owner to the buyer, thus enabling the buyer to be in broadly the same tax position as the seller.
“This should have the effect of enabling new or recent entrants to the UK continental shelf (UKCS) to bid for mature assets which no longer attract investment from their current owners who allocate capital to large projects in less mature basins.
“A key plank of government policy to maximise economic recovery and to reduce the cost of decommissioning is to get the larger mature assets in the UKCS into the hands of those companies that will focus on late life investment, extend the producing life of the assets and ultimately decommission these large fields more cheaply.
“New investment in the UKCS is the lifeblood to preserving an industry which has made a huge contribution to the UK’s economy over many decades, and supporting a supply chain focused on innovation and internationalisation.”
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