A new fiscal regime in the UK from 2027 could deliver an additional £14.9 billion, or $20 billion, to Britain’s revenues, the leading offshore industry group said in its annual Economic Report, calling on the Burnham government to bring forward the tax change planned for 2030.
Offshore Energies UK (OEUK) wants the Oil and Gas Revenue Levy, a price-triggered mechanism planned to replace the current Energy Profits Levy from 2030, to be introduced from January 2027.
The UK tax regime has changed several times since 2022 by both Conservative and Labour governments, making any investment plans so unpredictable that companies are quitting the UK North Sea.
Since the windfall tax was initially introduced by the Conservative government at the height of the energy crisis in 2022, oil and gas companies operating in the UK North Sea have been calling for certainty in the regulatory and tax framework. Changes in policies and the rising taxes imposed by the Starmer Labour government have driven away operators, who say that a lack of North Sea investments would only make the UK more dependent on oil and gas imports.
The Oil and Gas Revenue Levy – the Treasury’s permanent successor tax to the Energy Profits Levy – proposes a 35% levy on revenues when the price of a barrel of oil is above $90, and a therm of gas is above 90p, in addition to the ring-fenced corporation tax rate of 30% and the supplementary charge of 10%.
Current plans are for the Oil and Gas Revenue Levy to replace the Energy Profits Levy after 2030. But the industry wants it much sooner, to alleviate the fiscal pressure on operators and return investment confidence in the UK North Sea at a time of geopolitical upheavals that disrupt global oil and gas supply.
“The implementation of the OGRL in 2027, compared to the current 2030 proposal, delivers £2.4 billion more than the current trajectory (Corporation Tax, Energy Profits Levy, Petroleum Revenue Tax and Oil and Gas Revenue Levy) over the next decade, with a further £12.6 billion from additional payroll taxes, totalling £14.9 billion,” OEUK said in its report.
OEUK earlier this month urged Chancellor of the Exchequer, John Healey, to introduce the new tax regime from January 2027.
“We have seen how the Energy Profits Levy continues to drive away investment from the UK Continental Shelf and accelerate the decline which is being felt right across the country,” OEUK Chief Executive David Whitehouse said.
“With the right Budget choices, this sector can unlock billions of pounds of private investment, support jobs in every constituency across the whole of the UK, strengthen energy security and deliver more tax revenue for the Exchequer.”
By Tsvetana Paraskova for Oilprice.com
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