Economic Report 2017
1 6 .4 F iscal P olicy T h e ch ange s t o t h e UK up st r e am oil and gas t ax r e gim e int r oduce d b y Budge t s 2015 and 2016 h av e h e lp e d cr e at e one oĨ the most comƉetitiǀe Ĩiscal regimes Ĩor uƉstream inǀestment gloďally ;see section ϲ͘2Ϳ͘ The recommitment t o t h e Driving Investment Plan b y t h e C h ance llor in Autumn Statement 2016 h as se nt a st r ong m e ssage t o inv e st or s and com p anie s alike . T h e r e ar e e ar ly signs of inv e st or confide nce r e t ur ning w it h som e h igh p r ofile cor p or at e de als announced this year already, as outlined later in this section͘ 2
The Current Fiscal Regime T h e cur r e nt t ax r e gim e ap p licab le t o UK up st r e am oil and gas act iv it ie s is b e sp oke and h as e v olv e d ov e r m or e than ϰ0 years͘ It is noǁ made uƉ oĨ tǁo main elements ʹ ZingͲ&ence orƉoration Taǆ and ^uƉƉlementary harge͘ A third taǆ, Wetroleum Zeǀenue Taǆ, has ďeen Ɖermanently ǌeroͲrated ǁith eĨĨect Ĩrom 1 :anuary 201ϲ͘
omƉanies that do not Ɖroduce oil and gas ďut ƉerĨorm associated actiǀities, Ĩor eǆamƉle doǁnstream reĨining or suƉƉly chain serǀices, are not suďũect to this ďesƉoŬe uƉstream taǆ regime and Ɖay mainstream orƉoration Taǆ͘
All comƉanies, irresƉectiǀe oĨ ǁhether they are in or outside oĨ the Ɖroduction ringͲĨence, also Ɖay the usual direct and indirect taǆes, Ĩor eǆamƉle, caƉital gains, emƉloyment taǆes, sAT, leǀies and duties͘ Eone oĨ these taǆ Ɖayments are disclosed seƉarately Ĩor oil and gas comƉanies ďy ,er Daũesty͛s Zeǀenue and ustoms, ďut these p ay m e nt s ar e e st im at e d t o b e in e x ce ss of £ 1 b illion and cont r ib ut e t o t h e w ide r b e ne fit of t h e indust r y t o t h e UK e conom y . Ring-Fence Corporation Tax (RFCT) ʹ a taǆ on comƉany ƉroĨits similar to regular orƉoration Taǆ, ďut at a higher rate oĨ ϯ0 Ɖer cent ;Ɖreǀiously uƉ to ϱ2 Ɖer centͿ͘ The rate oĨ Z& T is set seƉarately Ĩrom the rate oĨ mainstream orƉoration Taǆ in the UK, ǁhich ǁas at 20 Ɖer cent Ĩor 201ϲͲ17, and Z& T ǁill not ďeneĨit Ĩrom the currently ant icip at e d de cr e ase in C or p or at ion T ax t o 17 p e r ce nt b y 2020. Supplementary Charge (SC) ʹ an additional taǆ comƉuted Ĩrom comƉany ƉroĨits similar to Z& T, ďut Ĩinance costs are not deductiďle͘ This taǆ ǁas introduced in 2002͘ The rate is currently 10 Ɖer cent, ďut ǁas Ɖreǀiously as high as ϯ2 Ɖer cent͘ In 201ϱ, the Inǀestment Alloǁance ǁas introduced to alleǀiate this additional layer oĨ taǆ that the UKC S p ay s r e lat iv e t o any ot h e r indust r y . T h e A llow ance m e ans com p anie s w h o inv e st in t h e b asin can r e cup e r at e caƉital and oƉerating eǆƉenditure against their ^ liaďilities, so that only Z& T is leǀied on ƉroĨits at a rate oĨ ϯ0 p e r ce nt .
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Petroleum Revenue Tax (PRT) ʹ a taǆ leǀied on Ĩields that receiǀed deǀeloƉment consent Ɖrior to 1ϲ Darch 1ϵϵϯ͘ tith eĨĨect Ĩrom 1 :anuary 201ϲ, WZT ǁas Ɖermanently ǌeroͲrated͘
The recent changes to loǁer the taǆ ďurden haǀe created a ďacŬdroƉ against ǁhich neǁ Ɖroũects are ďeing conside r e d.
^ƉeciĨic Ĩeatures oĨ the taǆ regime, including 100 Ɖer cent ĨirstͲyear aƉital Alloǁances and the eǆtended aďility to carry ďacŬ losses Ĩor decommissioning costs, Ɖroǀide inǀestors ǁith conĨidence and security as they naǀigate t h e ir r e gular up st r e am cash - flow p r ofile . L ar ge cap it al inv e st m e nt is r e q uir e d b ot h at t h e b e ginning of a fie ld’ s life w h e n it is b e ing de v e lop e d and at t h e e nd aft e r p r oduct ion h as ce ase d and t h e fie ld is b e ing de com m issione d.
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