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The UK Treasury is expected deliver on industry expectations of a tax cut for offshore oil and gas in Wednesday’s budget, according to reports.
The industry and Treasury have been holding ongoing talks since the historic collapse in global oil prices over the last year which threatens to extinguish activity in the UK’s continental shelf, and the BBC have reported that “major” cuts are now expected.
Chancellor George Osborne has already delivered a two percentage point tax decrease to companies operating in the area in December last year but is expected to offer further relief to the industry in the budget.
The cuts would be especially welcomed by utility giant Centrica which is the largest single player in the offshore oil and gas industry and has seen its share prices and profits tumble over the last year.
December’s cuts were the first allowed to the industry in 21 years, easing pressure on the sector which contributes the highest rate of corporation tax. Currently offshore oil and gas operators pay a corporation tax rate of around 30 per cent and an additional ‘supplementary tax’ of 30 per cent, although older fields, can pay rates as high as 80 per cent.
The Treasury has also been called on to add further support to the UK’s onshore oil and gas industry.
The Onshore Oil and Gas Group said the upcoming budget must include specific measures to safeguard the UK’s shale development supply chain, or risk losing out on tax receipts of over £6 billion from small onshore oil and gas companies, according to the industry trade group.
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