The concerted campaign to pressurise the UK Government into amending or even scrapping the Energy Profits Levy (EPL) was all to no avail.
The UK Budget made clear that the EPL will remain in place until 2030, after which it will be replaced by a permanent, revenue-based windfall tax mechanism based on set thresholds for oil and gas.
The UK Government says this is designed to give the oil and gas sector and its investors long-term certainty, but the industry needs such certainty in the here-and-now and that’s clearly not the case.
The decision to retain the status quo has been met, understandably, with negativity and disappointment in the north-east of Scotland. It places a big question mark over whether offshore operators will now sustain their interest in the North Sea over the coming years.
Fears around a sharp drop-off in investment and continuing job losses – already reaching levels of around 1,000 every month – have not been assuaged.
News of a relaxation of restrictions in the North Sea, specifically related to tie-backs to existing infrastructure, will be welcomed by some in the industry. But the no-change stance on the EPL is only tempered very slightly by this move, which does little to lift the sense of caution and hesitation that has settled over the industry.
The 78% EPL tax rate undermines confidence in an industry that is of course fundamental to the economy of the north-east and beyond, and also compromises the shift to a balanced energy mix as the loss of the requisite skills, resources and experience from the region now likely gathers pace.
It is no surprise to see the industry body Offshore Energies UK demand an immediate meeting with the Chancellor of the Exchequer to press for a reversal of the policy.
Most other elements of the Chancellor's 2025 Budget will likely take second billing in this part of the world, but there are nevertheless several direct implications for individuals, families and businesses.
Many of the Chancellor’s tax and national insurance measures, including the removal of a National Insurance exemption for salary-sacrificed pension contributions above an annual £2,000 threshold, increased taxes on property income from April 2027 and measures associated with green levies on energy bills, fuel duty and charges on electric and plug-in hybrid cars, will affect people north of the border.
As will the £820million extra that Scotland will receive over the next five years, divided into £510million for resource funding and £310m for capital funding. It will be interesting to understand in due course what that will precisely mean in practice, with the Scottish Budget looming in January.
The Chancellor briefly referenced in her Budget that, from April 2026, there will be further changes to Business Property Relief (BPR) and Agricultural Property Relief (APR). She signalled that the £1million allowance for the 100% rate of BPR and APR will be transferable between spouses and civil partners – a significant step, and one we’ll be exploring further on behalf of clients.
Adrian Johnston is an Aberdeen-based Tax Manager with MHA, the UK member of Baker Tilly International, a network of dynamic independent accountancy firms with a global footprint. MHA’s Aberdeen office is on Carden Place.
For more on MHA visit, https://www.mha.co.uk/