UK Upstream Oil and Gas Tax

The current United Kingdom oil and gas taxation regime is extremely complicated and has arisen out of the many changes that have taken place since specific oil tax provisions were introduced in 1975. The UK government has recently been undertaking steps to simplify the regime with a view of making the UK more attractive for foreign investments.

There are currently two main elements of government take to which oil and gas companies are subject. These are Corporation tax (CT) and Supplementary Charge (SC). A third, Petroleum Revenue Tax (PRT), still exists but has been set at zero percent with effect from 1 January 2016. A fourth, government royalty, was abolished with effect from 1 January 2003. A fifth, gas levy, has been relevant in the past but, like PRT, is currently set at zero.

Corporation tax (CT) is levied on the upstream profits of the company as a whole, with those profits after certain adjustments also being subject to Supplementary Charge (SC). Petroleum Revenue Tax (PRT) is only now relevant in the context of obtaining refunds of tax previously paid.

The marginal rate of these taxes is at present 40% but was 75% prior to 1 January 2016 for fields which were subject to PRT.

Non-residents with a presence in the UK are also subject to Corporation Tax on profits from exploration and exploitation activities in the UK or UK sector of Continental Shelf at normal CT rate of currently 20% (the rate is due to be reduced to 19% from 1 April 2017 and to 17% in 2020).

UK Upstream Oil and Gas Tax

Image courtesy of Engie E&P UK Limited

With an effective tax planning strategy taxation costs can be significantly minimised.

We offer a wide range of specialist advice in the areas of corporation tax advisory and compliance.

Our advisory services include, but are not limited to, advising on the following areas:

  • Group restructuring
  • Acquisitions & Disposals
  • Transfer pricing
  • Financing structures
  • Claims & Elections (such as capital allowances, group relief, loss carry back, field allowances, ring fence expenditure supplement election, foreign branch profit election, etc)
  • Review of a Controlled Foreign Company (“CFC”) position
  • Review of a distribution / dividend policy
  • Foreign tax / withholding tax relief

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