Measure
Today, 6 March 2024, the government announced two measures pertaining to the Energy Profits Levy (“EPL”), one of the additional taxes which applies to companies with UK oil and gas extraction activities:
Companies which are subject to the “ring fence” tax regime by virtue of undertaking oil and gas exploration and extraction activities in the UK or on the UK Continental Shelf.
The changes are expected to be included within the Spring Finance Bill 2024.
Today’s announcement extends the period for which the 75% headline rate of tax applies to the sector. This new extension risks diverting investment from the UK to other countries, particularly given the previous extension announced at Autumn Statement 2022 (which deferred the end of the tax from 31 December 2025 to 31 March 2028).
It will not have escaped companies’ attention that the EPL has once again been extended until the end of the government’s five year forecasting period, calling into question whether EPL is indeed a “temporary” measure, or indicative of a longer-term high tax environment for those in the upstream oil and gas sector.
This change seemingly contradicts commitments to predictability and certainty which the government made as recently as November 2023 within the conclusions to their oil and gas fiscal review, and will further erode the sector’s confidence in the UK as a place in which to do business.