ECONOMIC REPORT 2013
44
Marginal tax rates therefore vary across the
UKCS as follows:
• Fields subject to PRT, SC and RFCT pay 81
per cent of their profits in tax, comprising
PRT at 50 per cent, plus 30 per cent RFCT
and 32 per cent SC of the remaining
50 per cent
• Fields not paying PRT (either because they
are not liable to this tax, or by virtue of
a relief called Oil Allowance
7
) are subject
to tax at a marginal rate of 62 per cent
(30 per cent RFCT plus 32 per cent SC)
• Fields which benefit from a FA – a relief
against SC – pay tax at a rate between 30
per cent (that is only paying RFCT at 30 per
cent) and 62 per cent (on profits once the
field allowance has been used).
As the oil and gas fiscal regime taxes profits
at a minimum rate of 30 per cent which is
considerably higher than for companies in all
other parts of industry and commerce, the
Oil Allowance within the PRT regime and field
allowances for SC purposes only ever reduce
the tax burden from very high rates to one that
is closer to, but still higher than that for other
companies. Therefore, these allowances cannot
be said to represent a subsidy for the industry as
they only partially alleviate the tax burden.
Furthermore, some companies are also subject
to both the RFCT regime in respect of their
upstream oil and gas production activities and
the normal CT regime for their downstream
refining and marketing activities. Companies
cannot offset their profits or losses between the
two regimes to reduce their overall tax liability,
as upstream profits are always taxed separately
under the ring fence regime.
7
Oil Allowance is a relief to ensure that PRT is only levied on the largest, most productive fields. The allowance gives each field liable to PRT
amounts of oil and gas which can be produced free of PRT per tax period and for the life of the field. Any production above these amounts is
subject to PRT at the prevailing rate.
Figure 32: Tax Rates for the UKCS and Other UK Companies
0
20
40
60
80
100
Non Oil and
Gas Company
Qualifies for
Allowance
Non-PRT, No
Allowance
PRT Paying
Field
Share %
50% PRT
30% RFCT 32% SC
30% RFCT
23% CT
32% SC
30% RFCT
38% Post-Tax
Profit
38% Post-Tax Profit
77% Post-Tax Profit
of remaining 50%
Source: Oil & Gas UK
0-32% SC
38-70% Post-Tax Profit
