Clause 87

Finance Bill – in a Public Bill Committee at 3:30 pm on 18th June 2009.

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Former licensees and former oil fields

Question proposed, That the clause stand part of the Bill.

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

I shall be fairly brief on clause 87 and schedule 42 as we are advancing towards clause 89—

Photo of Peter Atkinson Peter Atkinson Conservative, Hexham

Order. I am sorry to interrupt the hon. Gentleman. Speaking of being brief, I warn the Committee that by 4 o’clock we will have sat for three hours. At about that time, I propose to have a short adjournment.

Photo of Bob Blizzard Bob Blizzard Government Whip

On a point of order, Mr. Atkinson. Thank you for that announcement. We had an agreement to finish clause 90 and the corresponding schedule today. I think the mood of the Committee is that it would be better if we could finish it without adjourning, so I hope that we can have a common purpose and move that way. Would you permit us, if necessary to go a little beyond 4 o’clock in order to expedite that?

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

Further to that point of order, Mr. Atkinson, we did not have that agreement. I was saying that we should stick to the schedule laid out by the Government at the beginning of the Bill, which would mean that we will continue discussing oil when we return on Tuesday. Clause 89, schedule 44, on which we intend to have a Division, is very substantial.

Photo of Peter Atkinson Peter Atkinson Conservative, Hexham

These are matters, not for the Chair, but for the usual channels. I am giving guidance to the Committee because, unlike honourable Members, the Clerk and I cannot keep going out, so after about three hours, it is useful to have a break. If the Committee is aiming to get towards the end of the business on oil, I will be flexible about when we adjourn, however, at 4 o’clock or slightly after, I propose to adjourn the Committee. That is in the hands of Committee Members and the usual channels.

Photo of Greg Hands Greg Hands Shadow Minister (Treasury)

Thank you, Mr Atkinson, for that clarification. I mentioned clause 89, but we are on clause 87 and schedule 42. Schedule 42 deals with the oldest, or first-round licences, that are due to expire in 2010 and proposes a way in which extended licences can be issued, and decommissioning relief against petroleum revenue tax, PRT, can be carried over for the licence  holder, after both extension and expiry. The existing position for PRT, which applies, as we know, only to fields developed before 1993, was summarised in the Government’s consultation response in November:

“When a field reaches the end of its productive life and decommissioning costs are incurred, to the extent that such costs are deductible for PRT purposes, any losses arising can be carried back for offset against profits from the field without limit, subject to the retention of the licence or within two chargeable periods of the relinquishment of the licence”.

As I understand the PRT regime, a chargeable period is a period of six months. I think the Minister is confirming that. So, under current legislation, PRT relief for decommissioning expenditure is not available to a company if those costs have been incurred for more than 12 months—two PRT periods—after it has ceased to be a licence holder in respect of that taxable field. The new rules will allow relief for such expenditure, but will also ensure that any income that may arise in respect of the assets in question will also be chargeable to PRT.

The changes, as I understand them, provide necessary clarity on what should happen if a license expires, or is due to expire, before this can happen. As it stood, if a company ceased to be a licensee, its obligation to decommission would remain, but finding itself outside the PRT regime, it would not have been able to relieve this cost against the PRT it had previously paid. Companies will now continue to be deemed to be licence holders for PRT purposes after the licence has expired. The extended licences themselves will be deemed to have expired at the point when production stops. We think this is a relatively neat solution to that problem, it has been broadly welcomed and addresses a real issue. We therefore see no reason to oppose the solution that DECC has put forward and that schedule 42 would implement.

Photo of Ian Pearson Ian Pearson Economic Secretary, HM Treasury

I am very pleased that the Opposition is in agreement with clause 87 and schedule 42. We have discussed this with industry, we believe it is the right way forward and I welcome the hon. Gentleman’s support.

Question put and agreed to.

Clause 87 accordingly ordered to stand part of the Bill.

Schedule 42 agreed to.