Tag Archives: petroleum revenue tax

23 Nov 2016

2016 Autumn Statement

The Chancellor delivered his Autumn Statement today.

There were no new fiscal measures directed at the oil industry apart from an announcement that petroleum revenue tax (PRT) administration is to be simplified with immediate effect.

The PRT administrative changes are: firstly, that the PRT opt out election process is to be simplified; and secondly for participators who choose not to opt out the returns process will be simplified.

Non-taxable field election

It has been possible to opt out of the PRT regime, and the field to become a non-taxable field, for a number of years, but only if it could be demonstrated that there was no reasonable expectation of PRT profits on the field.  The reduction in the rate of PRT to zero percent from the beginning of the year did not of itself extend the number of fields which could take benefit of the election under the current law.  Going forward there are to be no conditions attached to the making of an election, other than that the election must be in writing and will be irrevocable.

A consequence of making an election is that no loss accruing in the field can be claimed as an unrelievable field loss (UFL). This is unchanged from the previous rule.

As under the current rules, only the responsible person can make the election, and he must first have obtained the agreement of all other participators for it to be effective.

The Treasury Press Release covering this matter states that HMRC will discuss with any field owners making such an election alternatives to providing the data currently required in the PRT 1A return covering certain non-arm’s length sales of liquids. Provision of such data will however be on a voluntary basis.

The election will have effect for all chargeable periods commencing after the date the election is made.


We presume that any fields where there is a possibility of recovering PRT which has been paid in the past, or where there is a possibility that a UFL might arise in respect of the field for any partner, will not make the election. It is possible that partners in a field may have different positions which may frustrate the election being made. Indeed, it is important that companies who are contacted by the responsible person in a field should critically assess whether there are circumstances where a UFL could be created even where it appears that losses generated by decommissioning will not exceed historic field profits.  

Although the relevant legislation will not be enacted until Royal Assent of the Finance Act 2017 (typically towards the end of July next year) the amendment to the existing legislation is stated to have come into effect today, and it is understood that HMRC will accept that elections made before the end of 2016 will have effect such that PRT returns for CP1 2017 will not have to be filed (although the returns due in February 2017 for CPII 2016 will still have to be filed). 

Removal of PRT reporting requirements

For those fields which don’t take advantage of the new election (and for all taxable fields in respect of CPII 2016) the returns which have to be submitted for each field are to be simplified. This does not require legislative change.

It will no longer be necessary to calculate oil allowance, nor will it be necessary to calculate instalment payments or payments on account. In both cases this information will be of no relevance given the rate of PRT has been permanently reduced to zero for all chargeable periods, commencing 1 January 2016 and subsequent. Nor will volumetric units need to be converted into metric tonnes.

This change is made with immediate effect and will therefore apply to any returns that need to be submitted next February in respect of CPII 2016.

The Press Release issued states that the HMRC return forms will only be updated at some time in the future, but the parts of the forms relevant to these matters can simply be left blank when submitting the CPII 2016 and later returns.


These changes are welcome for companies who decide they still want to file PRT returns for particular fields, although the simplification is fairly minimal, and it is not thought that this will give rise to any significant compliance cost savings. The industry had requested a number of other changes such as annual returns, and deferral of filing deadlines. Such changes would require legislative change and it appears that the Government have taken the easy option which is unlikely to have any real benefit to industry. It is hoped that the other changes requested will be implemented by Government in due course. 

Other matters

There are a whole raft of other issues which industry has raised with Government as being important in achieving MER, such as the extension of the Investment Allowance regime for infrastructure tariffs, transferability of corporation tax capacity, and a number of technical PRT issues mainly around decommissioning.

Industry is also still awaiting the Statutory Instrument to be laid before Parliament, to give effect to the extension of the scope of the Supplementary Charge Investment Allowance relief to certain non-capital discretionary operating expenditure and to expenditure on leased assets. This measure is effective from 7 October 2015 and will be relevant to companies filing their 2015 corporation tax returns over the next 5 weeks if they have not already done so.


It is disappointing that none of the other issues raised by industry have been addressed at this time. The Press Releases do not even give an indication that any of these other matters are still under consideration, but it is hoped that progress can be made over the next year on a number of these issues with some much needed changes hopefully being introduced in Finance Act 2018. 

CW Energy LLP

23 November 2016