In a launch despatched to Rigzone lately, trade physique Offshore Energies UK (OEUK) introduced that it has launched knowledge “which fashions the impression of the federal government’s introduced stronger Power Income Levy (EPL) on the UK financial system”.
The modelling exhibits that the federal government’s proposed fiscal coverage would generate a loss in financial worth of round GBP 13 billion ($17.0 billion) in comparison with the financial contribution generated below the present windfall tax regime, OEUK famous within the launch, highlighting that it has already proven the figures to HM Treasury.
“The loss comes from an anticipated discount in funding by oil and fuel producers into UK tasks, with capital investments over the interval anticipated to fall to GBP 2 billion ($2.62 billion) in comparison with round GBP 14 billion ($18.36 billion) below the present regime,” OEUK acknowledged within the report.
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“The evaluation exhibits the coverage will undermine the UK offshore power sector’s potential to assist the federal government’s overarching objective of driving financial progress,” it added.
Within the launch, OEUK additionally outlined that the info exhibits that “an setting by which the headline tax price is elevated to 78 p.c and all EPL allowances are eliminated” would put round 35,000 jobs in danger to 2029 “because of tasks not going forward”.
OEUK mentioned within the launch that the info has been printed to assist inform resolution making forward of the Chancellor’s Autumn Assertion in October. The trade physique highlighted within the launch that there have been 5 adjustments to the UK fiscal regime in 24 months and mentioned the turmoil this has created for the trade will now be compounded by the plans outlined within the Chancellor’s Assertion.
“The Prime Minister has mentioned that the Finances might be painful,” OEUK Chief Government David Whitehouse mentioned within the launch.
“This trade acknowledges that tough selections will must be made. This can be a authorities that has made financial progress its most important precedence and but our evaluation exhibits that its coverage will in the end cut back this sector’s contribution to the UK financial system,” he added.
“This paper exhibits that proposals to go additional will set off an accelerated decline of home manufacturing, and a corresponding discount in taxes paid, jobs supported, and wider financial worth generated,” he continued.
In his assertion, Whitehouse famous that, “with an industrial technique inbuilt partnership with authorities, the UK can leverage the strengths of its offshore power trade, put homegrown innovation and expertise on the coronary heart of its internet zero ambitions, and make sure the UK is globally enticing for power funding”.
“For greater than two years UK oil and fuel operators have paid 3 times the speed of company tax of another sector within the financial system,” he added.
“Time is working out to mitigate harm that has already been achieved and to keep away from additional escalation. The Prime Minister promised to handle the North Sea in a way that doesn’t jeopardize jobs,” he mentioned.
“We now want an trustworthy dialog on how we will do that and want authorities to work with the sector at tempo,” Whitehouse went on to state.
Rigzone contacted HM Treasury and the UK Division for Power Safety and Internet Zero (DESNZ) for touch upon OEUK’s launch.
In response, a HM Treasury spokesperson informed Rigzone, “we’re dedicated to sustaining a constructive dialogue with the oil and fuel sector to finalize adjustments to strengthen the windfall tax, guaranteeing a phased and accountable transition for the North Sea”.
“Our plans for a brand new Nationwide Wealth Fund and Nice British Power will create 1000’s of latest jobs within the industries of the long run,” the spokesperson added.
On the time of writing, DESNZ has not but responded to Rigzone’s request.
In a press release despatched to Rigzone final month, OEUK highlighted that the UK Exchequer Secretary to the Treasury, James Murray, “co-hosted a fiscal discussion board at Offshore Energies UK’s Aberdeen workplaces with senior trade leaders”.
“The impression of adjustments to additional prolong and lift the Power Income Levy, or windfall tax, and the potential elimination of essential capital allowances for the sector have been central to discussions,” OEUK mentioned in that assertion.
EPL
The Power (Oil and Fuel) Income Levy (EPL) was launched in Might 2022 to tax the extraordinary earnings of oil and fuel firms working within the UK and on the UK Continental Shelf, a coverage paper posted on the UK authorities web site on July 29 states.
The levy is presently set at a price of 35 p.c, bringing the headline price of tax on upstream oil and fuel actions to 75 p.c, the paper highlights, including that the levy has two funding allowances – the 29 p.c funding allowance and the 80 p.c decarbonization funding allowance.
Capital allowances, together with one hundred pc First Yr Allowances, are additionally taken into consideration in calculating levy earnings, the paper notes. The paper states that the levy is because of expire on March 31, 2029, however factors out that it “will finish sooner if oil and fuel costs fall to thresholds set out within the Power Safety Funding Mechanism (ESIM)”.
“Immediately the federal government is asserting that the speed of the Power Income Levy will enhance to 38 p.c from November 1, 2024, bringing the headline price of tax on upstream oil and fuel actions to 78 p.c,” the coverage paper notes.
“The interval that the levy applies can also be being prolonged to March 31, 2030, which is the top of the monetary yr by which the present Parliament is because of end,” it provides.
“The Power Safety Funding Mechanism will stay in place, serving to to supply operators and their buyers with confidence the levy will not apply if costs fall persistently to, or beneath, traditionally regular ranges for a sustained interval,” it continues.
“The federal government will even take away unjustifiably beneficiant funding allowances from the Power Income Levy, together with by abolishing the levy’s most important 29 p.c funding allowance for qualifying expenditure incurred on or after 1 November 2024,” it goes on to notice.
“Expenditure incurred prior to creating the adjustments on November 1, 2024, is not going to be affected. As a part of this, the federal government will even cut back the extent to which capital allowance claims (together with First Yr Allowances) could be taken into consideration in calculating levy earnings,” it continues.
The paper states that there aren’t any plans to alter the provision of capital allowances within the everlasting regime and says the federal government will retain the decarbonization funding allowance.
“Additional particulars on these adjustments might be set out on the finances. Total, cash raised from these measures will assist our clear power transition, growing safety, and offering sustainable jobs for the long run,” the paper says.
To contact the writer, e-mail andreas.exarheas@rigzone.com
