The Chancellor delivered the Budget today. While some of the changes announced will result in an increase in EPL the big news is that the trailed restriction on the deduction of capital expenditure against EPL has not been introduced.
No changes were announced to the rules on ring fence corporation tax and supplementary charge to corporation tax.
Capital allowances for EPL
By way of background, in July, HM Treasury issued a policy paper that announced that:
“…the government will also reduce the extent to which capital allowance claims (including First Year Allowances) can be taken into account in calculating levy profits…”
However, after a period of consultation the Chancellor announced today that when calculating profits charged to EPL the 100% first year allowances will be maintained.
Other EPL changes
Other Budget announcements for EPL were largely expected:
- Increase in the rate of EPL to 38%;
- Reset of the sunset clause to 31 March 2030;
- Abolish the increased deduction for general investment expenditure (currently provides additional relief of 29%).
- Retain decarbonisation investment expenditure rules (the 80% rate of uplift will be reduced to 66% as confirmed in the Budget supporting documents).
Date of implementation of changes
As expected, these changes are to have effect from 1 November 2024.
Comments
The EPL rate and other changes that increase the charge to EPL will not be welcomed by the Industry. However, for many, the threat of restricting capital expenditure deductions against EPL was of more significant concern. The fact that the Chancellor has listened to the Industry will be seen as a positive signal and may perhaps go some way to alleviating the justified concerns of investors on the stability of the UK oil tax regime.