Mark Andrews, UK Head of oil and gas and Claire Angell, UK Head of Tax for energy at KPMG comment on the implementation of the transferable tax history for North Sea assets.
Mark Andrews, UK Head of oil and gas at KPMG responds to today’s announcement on the implementation of the transferable tax history for North Sea assets:
“We are pleased to hear the Chancellor’s announcement today, as existing decommissioning tax rules have often been cited by the oil and gas industry as one of the barriers to attracting new investment into the North Sea Basin.
“This change in the transfer of tax history should level the playing field across all potential investors, and allow the North Sea to remain competitive in the fight for new sources of capital.
“Recent transactions in the sector have seen the transfer of late life assets to those owners with the agility and specialist experience to best exploit the remaining reserves, and it is hoped today’s announcement will help drive more of this activity once this change takes effect in 2018.”
Claire Angell, UK Head of Tax for energy at KPMG adds:
“There has been a long-held concern that the current tax treatment of decommissioning costs were adversely impacting the goal of Maximising Economic Recovery (MER) in the North Sea Basin. The innovative approach announced today should encourage new investment and new entrants which, it is hoped, will increase production from late life fields. HM Treasury expect that this additional investment and resultant increased production to create £70 million of additional tax revenues in the next five years.
“Draft legislation is due to be released in Spring 2018 and have effect from 1 November 2018, which could potentially dampen deal activity in the short term as the finer details are confirmed.”
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