23 Mar 2016

Reduction in PRT and Supplementary Charge rates – effect on instalment payments and reporting

The Chancellor announced in the Budget Statement on 16th March that the rate of Petroleum Revenue Tax (PRT) would be reduced to nil and supplementary charge to 10%. Both these changes are to be back dated and effective from 1 January 2016 and therefore should be taken into account in the instalment payments for periods beginning on or after that date.

For accounting purposes the changes should be reflected in the figures for the first balance sheet date ended after the changes are enacted or substantively enacted. For these purposes substantively enacted is when the change is virtually certain to pass into law.

  1.  Petroleum Revenue Tax

The resolution giving rise to the reduction in the PRT rate from 35% to 0% for the chargeable periods ending after 31 December 2015 was passed in the House of Commons on 22 March under the provisions of the Provisional Collection of Taxes Act 1968.

Comment:

No further instalment payments are required for PRT paying fields. Any instalments paid in respect of the chargeable period to 30 June 2016 should now be refunded. We would advise companies to write to their PRT inspector setting out the amount of refunds to be processed.

For reporting purposes the reduction in rate will be effective for periods ended on or after 22 March.    

2.   Supplementary Charge (SC)

The reduction in SC from 20% to 10% for the accounting periods commencing on or after 1 January 2016 is expected to be enacted when the Finance Bill receives Royal Assent.

Comment:

The reduction in the rate of SC will result in lower instalment payments being due. Under the existing regime the first instalment payment for Corporation Tax and Supplementary Charge is required after six months and 13 days after the first day of the accounting period. For example, a company with a 12 month accounting period beginning on 1 January 2016 the first instalment payment would be due on 14 July 2016.

It is possible that the change may not be enacted by this date but we understand that HMRC expect instalments to be calculated using the new rate.    

For reporting purposes we would expect the reduction in rate to be effective for periods ended on or after the date when the Finance Bill has its third reading in the House of Commons which under the normal parliamentary process would be in July.     

If you would like to discuss any of the above changes please speak to your usual contact at CW Energy or contact us on +44(0)20 7936 8300.