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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
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 .
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.