The Chancellor delivered his 2018 Autumn Budget today.
In the Chancellor’s speech there was a welcome confirmation that North Sea tax rates would remain unchanged, together with an announcement that the Government would launch a call for evidence on creating a global centre of excellence for decommissioning in Scotland.
Within the detailed announcements there was nothing further directly applicable to the upstream oil & gas sector, other than the Finance Bill contains the previously announced “late life” asset proposals on transferable tax history (TTH) and PRT relief for decommissioning expenditure.
These issues have been dealt with extensively in previous Newsbriefs – see our 16 July 2018 Newsbrief at the time the draft legislation was published https://cwenergy.co.uk/finance-bill-and-decommissioning/, and our 22 November 2017 Newsbrief on the 2017 Autumn Budget, when these proposals were first set out https://cwenergy.co.uk/2017-autumn-budget/.
Since publication of the draft clauses this summer there have been a number of workshops, attended by Government officials and industry, to work through the draft clauses in detail. As a result of this work a number of changes to the original clauses, predominantly those relating to TTH, have been made. These changes do not however alter the fundamental operation of TTH: rather they ensure, in some cases, that the rules work as Government intended, but also the scope of HMRC to retrospectively amend or deny a TTH election has been limited, to give buyers and their financiers more certainty that the TTH will be available.
We think the workshop process has, in general, been very productive and, although there are still some differences of view between the industry and Government representatives, the final legislation will be more “fit for purpose” as a result.
The TTH and PRT relief changes are thought to be a useful additional “tool in the tool kit” when constructing commercial deals, but will not be appropriate or necessarily relevant for all deals, and it remains to be seem how often they will be used.
CW Energy LLP
29 October 2018
If you would like to discuss the Autumn Budget, please contact your normal CWE contact.