Economic Report 2016 - Oil & Gas UK

10. The Upstream Fiscal Regime 10.1 Changes to the Regime Announcements by the UK Government at Budget 2015 and 2016 have transformed the upstream oil and gas tax regime to make it more internationally competitive and to boost investor confidence in light of the UKCS’ increasing maturity, reduced profitability and perceived lack of prospectivity. Profits are now taxed at a flat 40 per cent headline rate. The UK Government’s policy desire is to attract investment into the region to safeguard its productive future.

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Budget 2015 and 2016 have transformed the upstream oil and gas tax regime.

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3

4

Figure 56: Historic Upstream Tax Rates

100%

5

PRT-Paying

PRT with SC Relief

Non PRT-Paying

Non-PRT with SC Relief

90%

80%

PRT-paying fields (sanctioned before 1993)

6

70%

60%

7

50%

Non PRT-paying fields (sanctioned after 1993)

40%

30%

8

Marginal Tax Rate on Profits

20%

10%

9

0%

1980

1985

1990

1995

2000

2005

2010

2015

Source: HMRC

10

The number of taxes paid by UKCS fields has fallen from three to two. The Chancellor announced in the March 2016 Budget that the Petroleum Revenue Tax (PRT) was being permanently zero-rated from 1 January 2016. The PRT was previously chargeable on fields that had received development consent prior to March 1993, albeit with allowances that ensured that it was only actually charged on the most productive fields.

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