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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.
Figure 56: Historic Upstream Tax Rates
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1980
1985
1990
1995
2000
2005
2010
2015
Marginal Tax Rate on Profits
PRT-Paying
PRT with SC Relief
Non PRT-Paying
Non-PRT with SC Relief
PRT-paying fields (sanctioned before 1993)
Non PRT-paying fields (sanctioned after 1993)
Source: HMRC
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.
Budget 2015 and 2016 have
transformed the upstream
oil and gas tax regime.