The current United Kingdom oil and gas taxation regime is complicated and has arisen out of the many changes that have taken place since specific oil tax provisions were introduced in 1975.
There are currently three elements of government take to which oil and gas companies are subject. These are Corporation tax (CT) and Supplementary Charge (SC). A temporary additional charge, Energy Profits Levy (EPL) was introduced with effect from 26 May 2022 and is expected to apply until 31 March 2028.
Petroleum Revenue Tax (PRT), still exists but has been set at zero per cent with effect from 1 January 2016. Petroleum Revenue Tax (PRT) is only now relevant in the context of obtaining refunds of tax previously paid. Government royalty was abolished with effect from 1 January 2003. 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) and Energy Profits Levy.
The marginal rate of these taxes is at present 75%, with CT at 30%, SCT at 10% and EPL at 35%.
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 the normal CT rate of currently 25% (the rate was increased from 19% to 25% with effect from 1 April 2023).