Readers may be aware that the Government has set up an Office of Tax Simplification (OTS) to review the UK tax system with a view simplifying and streamlining the regime.
The OTS initially identified all of the reliefs that they thought existed in the UK tax regime, some 1,042 of them!
The OTS has then published an initial report setting out its conclusions in respect of 13 specific reliefs affecting different taxes, types of taxpayer, and different sizes, together with a list of 75 further reliefs (Annex A), that they are going to review and include in their final report, plus a second list of another 75 reliefs (Annex B) that they will review if they have time.
Included in Annex B are a number of reliefs of direct relevance to upstream oil and gas activities. These are primarily 100% FYAs for ring fence expenditure (Ref 137); Mineral extraction capital allowances (Ref 526); Capital Allowances – mining & oil industry (Ref 527) which covers, inter-alia, the special reliefs for offshore decommissioning; and Research and Development capital allowances (Ref 529).
The fact that a relief is reviewed does not mean that it is necessarily the case that there will be a recommendation that it should be amended or changed; indeed of the 13 initially reviewed the initial conclusion is that 3 of them should remain unchanged.
Given the integrated nature of the overall oil and gas tax regime and the regular consultations between industry and Government and whether the regime is fit for purposes it is thought unlikely that the review, even if it does extend to the reliefs referred to above will lead to any change in the law. However, it is perhaps surprising, given the significance of the industry to the Exchequer and the economy as a whole, that any oil and gas reliefs have been targeted at all for review, and clients may want to make representations to this effect.