George Osborne hands North Sea £160m tax break
AN EXTRA £2 billion of investment in the North Sea could be generated by tax breaks announced by chancellor George Osborne, industry leaders claim.
• Oil companies to recieve tax relief when exploiting older oil fields
• Move comes after UK government criticised for increasing taxes paid by oil firms last year
Mr Osborne yesterday unveiled measures which will mean oil and gas taken from older fields will no longer have to pay full duty.
The new Brown Field Allowance will shield up to £500 million of income from the charge when firms are boosting production from
established oil or gas fields – potentially cutting their tax bill by £160m.
The move is expected to cost the Exchequer £100m per year initially, but officials believe long-term tax revenues will be significantly higher.
Mr Osborne said: “This tax allowance is more good news for the North Sea, good news for jobs and good news for the broader economy. It will give companies the incentive to get the most out of older fields, creating jobs and delivering more (tax) revenue.”
Mike Tholen, economics director for umbrella body Oil and Gas UK, described the tax relief as “a very good step in the right direction”.
He said: “I think the Chancellor is right to recognise that many of the older fields in the UK struggle to attract new
investment, and this is a bit of a shot in the arm for them.
“I’m well aware that in the short term there are some very substantial projects waiting for this announcement, and I’m confident there will be some big investments announced.
“Investments over the next year or so could be at least £2bn better because of today’s news.”
He said such announcements “help attract investment to keep old fields going, which is crucial for everyone in Scotland”.
Alan McCrae, head of UK
energy tax at accountants PwC, said: “By reducing those rates for future production more investment will be stimulated. As well as creating jobs now, this should help future North Sea production and tax revenues.
“This measure recognises that investment in existing fields is every bit as important as new exploration in the fight to
produce as much from the North Sea as possible.”
There was anger, however, from small business representatives who want the Chancellor to cut fuel duty. Last year, Mr Osborne provoked fury by hiking the supplement on North Sea oil from 20 to 32 per cent to generate money to keep fuel prices down for motorists.
John Walker, national chairman of the Federation of Small Businesses, said: “The Treasury increased tax on the oil and gas industry to pay for a cut in fuel duty. Now, the Chancellor has announced a tax break for the industry.
“Businesses and households face a 3p-per-litre fuel-duty increase in January. Are future fuel duty increases now more likely as a result of this tax break?”
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