Offshore Industry: Taxation

HM Treasury written question – answered on 12th September 2014.

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Photo of Caroline Lucas Caroline Lucas Green, Brighton, Pavilion

To ask Mr Chancellor of the Exchequer, what the forecast cost is of tax relief arising from the (a) petroleum revenue tax oil allowance, (b) petroleum revenue tax tariff receipts allowance and (c) Ring Fence Expenditure Supplement and (i) ultra-heavy oil field, (ii) ultra-high pressure/high temperature field, (iii) small or gas field, (iv) deep water gas field, (v) large-deep water oil field, (vi) large-shallow water gas field, (vii) brownfield and (viii) remote deep-water gas field allowances in each year from 2014-15 to 2017-18.

Photo of Caroline Lucas Caroline Lucas Green, Brighton, Pavilion

To ask Mr Chancellor of the Exchequer, what the total cost of tax relief from the (a) petroleum revenue tax oil allowance, (b) petroleum revenue tax tariff receipts allowance and (c) Ring Fence Expenditure Supplement and (i) ultra-heavy oil field, (ii) ultra-high pressure/high temperature field, (iii) small or gas field, (iv) deep water gas field, (v) large-deep water oil field, (vi) large-shallow water gas field, (vii) brownfield and (viii) remote deep-water gas field allowances in each year from 2014-15 to 2017-18.

Photo of Priti Patel Priti Patel The Exchequer Secretary

HMRC publish historical estimates of the costs of tax expenditures and structural reliefs. The costs of PRT Oil Allowance and Tariff Receipts Allowance were featured in the latest release in April 2014 as follows:

2012-13 2013-14

Oil Allowance £95mn £80mn

Tariff Receipts Allowance £35mn £25mn

There are provisions for the costs of these allowances in the Office for Budget Responsibility (OBR) forecasts of UK Oil and Gas Petroleum Revenue Tax for Budgets, Autumn Statements and Fiscal Sustainability Reports, but the costs are not specifically identified, so there are no estimated costs available for 2014-15 to 2017-18.

There are also provisions for the costs of Ring Fence Expenditure Supplement (RFES) and the variety of field allowances available in the OBR Corporation Tax forecasts, but the specific costs have not been identified.

The estimated impacts of RFES and field allowances, in terms of the direct costs and the effect on the investment in the sector, are included in the published policy costing notes.

The effect of the increase of RFES from 6% to 10% from January 2012, as featured in the Autumn Statement 2011 policy costing note is an estimated tax cost to the Exchequer of £5 million in 2014-15, £50 million in 2015-16 and £10 million in 2016-17. RFES was introduced from January 2006 and costs for 2014-15 onwards were not estimated at that time.

The effect of the increase in small field allowance from £75 million to £150 million and the introduction of the Large Deep Water Oil field allowance in Budget 2012 was estimated to be a tax gain to the Exchequer of £45 million in 2014-15, no net tax impact in 2015-16 and a tax cost to Exchequer of £45 million in 2016-17 (of which the direct costs in reduced corporation tax were estimated at £10 million, £20 million and £65 million, respectively).

The effect of the introduction of Brown Field Allowance and the Large Shallow Water Gas field allowance in Autumn Statement 2012 was estimated to be a tax cost to the Exchequer of £165 million in 2014-15, £255 million in 2015-16, £230 million in 2016-17 and £165 million in 2017-18 (of which the direct costs in reduced CT were estimated at £45 million, £80 million, £85 million and £90 million, respectively).

Estimates of the costs of introducing Small Field allowance, Ultra High Pressure/High Temperature field allowance and Ultra Heavy Oil field allowance in March 2009, and Deep Water Gas field allowance in January 2010, are not available for 2014-15 onwards.

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