Introduction
In the 2022
Autumn Statement, the Chancellor announced a review into the long-term fiscal regime for oil and gas to ensure the regime delivers predictability and certainty, supporting investment, jobs and the country’s energy security.
The current fiscal regime that applies to upstream oil and gas activity is outlined in detail in Chapter 3 and currently consists of three permanent elements and one temporary element (the Energy Profits Levy). The review will consider the future of the permanent regime in its totality, including Petroleum Revenue Tax, Ring Fence Corporation Tax, Supplementary Charge, and the different tax reliefs and allowances available within the regime.
The government published the
Terms of Reference for the review in June 2023. These set out that it is considering whether and how the fiscal regime can support investment in the UK consistent with the UK’s energy security and net zero ambitions by:
- Supporting UK energy security and helping to meet domestic energy demand, as we transition to net zero, through incentivising activity that maximises economic recovery of the UK’s oil and gas resources in the medium term;
- Promoting the pathway to a net-zero basin by 2050 through supporting the decarbonisation of upstream oil and gas activities as set out in the North Sea Transition Deal (NSTD);
- Prioritising long-term energy security, and responding to the diversification of activity in the basin in a way that minimises barriers to investment in greener technologies;
- Being made more efficient and predictable, including in its response to any future price shocks and persistent price volatility as well as through further simplification;
- Delivering a fair return on the nation’s resources to support the public finances and fund vital services.
The review is considering how the regime can support broader government objectives as they apply to oil and gas activity in the UK and on the UK Continental Shelf (UKCS), and broader activity on the UKCS, including the government’s
Energy Security and Net Zero Growth Plans, but any outcomes will relate wholly to fiscal policy.
The review is led by HM Treasury, working closely with HM Revenue & Customs (HMRC), the Department for Energy Security & Net Zero (DESNZ) and the North Sea Transition Authority (NSTA). Since the announcement of the review, officials across departments have started work to consider the issues highlighted in 1.2-1.3. The government will use this call for evidence and direct engagement with stakeholders to progress this work further. HM Treasury is committed to engaging with the oil and gas industry and other interested stakeholders as part of the review’s process.
Purpose of the Call for Evidence
This call for evidence seeks information on the areas outlined above, centred on the evolving context of oil and gas operations and how the design of the fiscal regime has an impact on the activity of the sector.
The focus of the call for evidence is on the long-term future for the regime rather than short-term changes to the current fiscal regime. Therefore, changes to the Energy Profits Levy (EPL) will not be considered as part of this call for evidence. The government recognises that the sector will continue to adapt in different ways at different stages of the transition to net zero and welcomes evidence about these different periods up to 2050. While demand for oil and gas will decline, they will retain a crucial role as critical fuels that play an important part in ensuring secure energy supplies.
The government’s recent
Powering Up Britain: Energy Security and Net Zero Growth Plans form an important foundation for the review’s objectives. As oil and gas consumption was considered in these documents, it will not be reconsidered as part of this review.
Mainstream elements of the UK tax system as they apply to the industry and its supply chain, including income tax, National Insurance contributions, VAT and mainstream Corporation Tax are also out of scope of the review - changes to these are considered in the context of the wider UK tax system.
The review will consider how any future reforms to the regime can continue to support the public finances by delivering a fair return in exchange for the use of the nation’s resources.
Chapter 2 asks some questions about you, including any relevant professional background, or whether you are replying on behalf of a business or representative organisation. Chapter 3 considers the existing tax and policy landscape. Chapter 4 focuses on investment and energy security. Chapter 5 centres on the transition to net zero and decarbonisation. Chapter 6 explores how the fiscal regime could be more simple, predictable and stable. Chapter 7 considers equalities.
The government will review all responses in considering next steps towards the long-term design of the fiscal regime and will use the evidencegathered from this call for evidence to inform that process. Respondents may wish to focus on the issues which most impact them, but the government welcomes responses to any questions that respondents choose to answer. The government will confirm next steps by the end of this year.