Conflicting messages for Oil & Gas investors
19 March 2014
Derek Leith, head of oil and gas taxation and office managing partner at EY in Aberdeen, comments on the measures introduced in today’s (Wednesday 19 March) Budget
“Today’s Budget contains a mixture of measures that will impact positively and negatively on oil and gas production companies operating in the UK.
“In addition to stimulating shale gas activities via the new onshore allowance, there was the welcome announcement of a new high pressure/high temperature allowance that will encourage the development of at least two large offshore gas fields.
“There was also an enhancement to the ring fence expenditure supplement, a promise to review the tax regime relating to exploration and changes that ensure early stage oil and gas companies are removed from the targeted loss buying rules introduced last year.
“On the downside, the Chancellor has stuck with the majority of the changes to the taxation of the leased assets used on the UK Continental Shelf proposed in the Autumn Statement, despite representations from industry.
“That will give rise to additional costs for oil and gas producers, as will the changes to the taxation of offshore intermediaries, announced last year, that take effect in April.
“On balance, the onshore and HP/HT allowances further demonstrate the UK Government’s willingness to encourage investment and hopefully outweigh the negative effects of the cost inflation caused by the leasing and national insurance charges.”
For more information on the 2014 Budget, visit the EY 2014 Budget page.