The Chancellor’s Autumn Budget announcement has offered some reassurance to Scotland’s oil and gas sector, but a delay in facilitating the transfer of late life oil and gas assets is a disappointment, according to a leading business and financial advisor.
Grant Thornton has welcomed the announcement of a range of legislative developments designed to drive up investment in the sector, as it gradually rebuilds lost ground.
But, while the plan to introduce the initiative to enable oil and gas companies to transfer tax histories has been confirmed, its introduction has now been pushed back to November 2018, allowing for draft legislation to be issued in spring of next year. The plan, which is highly innovative and much anticipated, is designed to prevent potential buyers being put off by the significant lack of tax relief available with respect to the substantial decommissioning liabilities associated with late-life oil and gas assets.
Despite the slight delay, the UK Government has confirmed it remains committed to delivering on its promises and will following through on the consultation that closed in August, which originally set out the plans.
Other initiatives outlined in the Budget include the launch of a technical consultation on allowing a petroleum revenue tax deduction for decommissioning costs incurred by a previous licence holder. This will support transfers of assets where the seller retains the decommissioning liability.
The UK Government has also stated that it will legislate in the Finance Bill 2017/18 in order to put beyond doubt that all tariff income earned by petroleum licence holders is within the ring-fenced corporate tax regime. The Treasury has stated that this is to ensure that the Investment and Cluster Area allowances are definitely extended to include income from tariff receipts.
James Strang, associate tax director at Grant Thornton
James Strang, associate tax director at Grant Thornton