CW Energy LLP

Deferral of PRT returns


  • Companies need to think about preparing the PRT returns for CP I 2016, the first period for which the zero % rate is to apply.
  • Ongoing discussions between industry and HMRC may shape the form of future returns or indeed the extent to which companies feel it necessary to make returns.
  • Now is a good time to revisit the options available to companies.

If you wish to discuss your companies’  PRT returns with one of our team please get in touch. 


Following the introduction of the PRT zero rate companies are looking at ways of reducing their PRT administration.

As a reminder under current law companies have four options available to them:

  • Deferral of returns for a specific period
  • Indefinite deferral
  • Full opt out
  • Prepare full returns

The first option has been sparingly used as ultimately there is a requirement to submit returns. The second as been adopted by some fields but requires a simplified annual return and again has not been that widely used.

The third option is clearly the preferred option for fields which are not expected to pay, have never paid in the past and where there is no prospect of a UFL being generated.

The reduction in the rate of PRT to zero % potentially increases the number of fields that could now benefit from a Never Payer election.

Unfortunately, to qualify as a Never Payer, current law requires the company to demonstrate there are no future assessable profits (after oil allowance and other reliefs) rather than no future tax, and the burden of proof has often proved too onerous even for fields that may previously have qualified.


Industry have been in discussions with HMRC about relaxing the PRT Never Payer election. The next opportunity to amend the law to relax the conditions for opt out would be in the 2017 Finance Bill.

It is anticipated that that the Never Payer election will be made available to any field group that so elects, as it appears there would be no risk to the HMG tax take although this would require government to be comfortable that the rate of PRT will never be raised.

Companies should carefully review their position to determine whether a field could fall into the Never Payer election. If there have been PRT payments in the past either by the current holder or a previous interest holder it is unlikely that such an election would be beneficial unless there was certainty that losses generated in the future would not under any circumstance be carried back. Companies will need to review not just the expected outcome but also worse case scenarios, including taking into account unexpected events, for example the possibility of early abandonment.

A good example is the Hutton field where damage to a pipeline caused the field to be shut in and as a result abandoned prematurely.

At the other end of the spectrum an opt out should be avoided if there was any possibility of a UFL being generated.

See our April newsletter where the Never Payer (opt out) election is considered.

Meanwhile returns will still be required for the next two, or possibly three, chargeable periods.

If one came to the conclusion that a Never Payer election was to be of benefit, one approach would be to elect to defer returns for, say, two years and then, assuming a change of law in the conditions required for a Never payer field i.e. no tax liabilities, submit a Never Payer election.

HMRC require 28 days to consider a deferral application, but you would want a decision before the PRT compliance timetable starts, i.e. by mid to late July for the chargeable period ending 30 June 2016, so it is advisable to make your elections in the next couple of weeks.

One might also consider again the deferral option if there is only a low probability of a PRT refund arising through loss carry back or UFL claims. In this case you could apply for indefinite deferral of returns. Should the field underperform such that a PRT refund becomes available you would then have the option to recreate all the deferred returns.

Discussions on other compliance saving measures will continue.

If you would like to discuss the issues raised in this note, please call your normal CWE contact.