UK tax take from North Sea turns negative

OREANDA-NEWS. May 27, 2016. The UK government's tax take from the North Sea oil and gas industry has turned negative for the first time since records began in 1968.

Although corporation tax remained positive at ?538mn in 2015-16, a change to the tax regime for oil and gas producers meant more money went out than came in to government coffers, leaving a negative balance of ?24mn. The government pinned the outcome on "low oil prices… continuing high levels of investment and increasing amounts of decommissioning expenditure" – it had expected a net tax take of minus ?10mn.

The negative figure for petroleum tax revenues is made possible by the fact North Sea firms are able to carry back losses indefinitely to earlier periods, reducing liabilities and leading to tax repayments.

The figures will come as little surprise to the UK government, which announced tax relief measures amounting to about ?1bn in its latest budget and stated that it was "effectively abolishing" the petroleum revenue tax, moving it to 0pc from 50pc with effect from 1 January this year.

The news also follows a collapse in the profitability of UK North Sea operators announced by the UK statistics office ONS earlier this year.