Politics

Loophole could let North Sea oil and gas giants slash UK windfall tax bill | Oil and gas companies

North Sea oil and gas companies that already profit from large tax breaks could use recent guidelines to slash how a lot they pay underneath a brand new windfall tax introduced by Rishi Sunak as a part of his £15bn value of residing bundle, in response to a thinktank.

The chancellor dangers elevating a fraction of the £5bn he expects from the advanced scheme – which permits the price of new investments to be offset in opposition to income – ought to oil and gas companies take the chance to dramatically cut back their contribution to the exchequer, mentioned the left of centre Common Wealth.

The warning comes after the Liberal Democrats mentioned the chancellor’s refusal till final week to introduce a windfall tax meant he missed out on £3bn from the “extraordinary profits” reported by oil and gas companies in 2021 and one other £8bn this year.

Christine Jardine, the Liberal Democrat Treasury spokesperson, mentioned Sunak’s “11th hour” 25% windfall tax on oil and gas company income allowed them to hold on “with business as usual” and direct most of their income to shareholders.

“It’s bad enough that the chancellor waited until the 11th hour to tax big oil and gas, when Liberal Democrats first called for a windfall tax last October. Now it looks like it may not even raise what he said it will. That’s more levy lite than windfall tax.”

She accused the chancellor of “going soft on huge companies making a killing out of a crisis”.

Rishi Sunak
Rishi Sunak introduced the windfall tax as a part of a £15bn value of residing bundle. Photograph: Peter Nicholls/Reuters

Oil giants BP and Shell are on the right track to make a mixed revenue of about £40bn this year from the rocketing value of petrol and gas.

Jardine added: “He chose to leave billions on the table that could have been used for support while slamming families with unfair tax hikes instead. It goes to show how out of touch he and the Conservatives are with people that are suffering.”

Common Wealth mentioned North Sea oil and gas companies presently benefited from a variety of subsidies to cover the prices of extracting new wells and decommissioning ones which might be spent.

It pointed to analysis carried out with the New Economics Foundation, which discovered that the federal government had handed companies working in British waters tax breaks value about £3.1bn in 2019-20 and £2.5bn in 2020. Most of the funds have been directed to shareholders in share buy-back schemes, the thinktanks mentioned.

The Treasury has not calculated how a lot of the £5bn in additional tax could be lost if North Sea operators declare additional funding allowances over the following three years.

Labour mentioned the dearth of session with the business earlier than Thursday’s assertion by Sunak revealed that the plans have been hurried and designed to distract from the Partygate scandal.

In January, shadow chancellor Rachel Reeves referred to as for a one-year, 10% extra tax on North Sea income to lift between £2bn and £3bn. Jardine had proposed a 25% tax final October, consistent with the chancellor’s scheme, however with out the tax breaks on supply from the Treasury.

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