In yesterdays budget speech, Chancellor of the Exchequer Philip Hammond revealed plans to introduce transferable tax history for the oil and gas industry by November 2018. In an effort of spurring fresh investment in UK oil and gas assets and spreading the multibillion-pound cost of decommissioning between industry and government.
North Sea industry leaders have repeatedly called for the UK Government to allow tax credits to be transferred to the new owner once the assets have been sold. The new plans have been well received within the industry, with Mr Hammond indicating the changes would be in place in November 2018.
Philip Hammond, UK chancellor, said in his Budget speech that an expert panel would examine ways of making it easier to buy and sell North Sea oil and gasfields, with the aim of keeping them in production for longer. The announcement reflects the Treasury’s focus on how to wring as much as possible out of the remaining North Sea resources as decommissioning costs become an increasing burden for industry and taxpayers. “As UK oil and gas production declines, it is absolutely essential we maximise exploitation of remaining reserves,” Mr Hammond told MPs. Oil and gas companies are entitled to tax relief on the cost of plugging wells and dismantling infrastructure when fields cease production. However, the value of these benefits depends on how much tax the operator has paid during the life of the asset.
Deirdre Michie, Chief Executive of Oil & Gas UK, said: “We very much welcome the Chancellor’s action to enable the implementation of transferable tax history. This is a vital step that can bring in new investment to increase recovery from existing fields and fund fresh investment which is key to generating activity for our hard-pressed supply chain. It will also help extend the lives of many mature fields and postpone decommissioning.”