UKCS decommissioning taxation due study

March 8, 2017
The UK government will study changes sought by the offshore oil and gas industry to tax rules affecting sales of offshore equipment in late years of operation.

The UK government will study changes sought by the offshore oil and gas industry to tax rules affecting sales of offshore equipment in late years of operation.

The spring budget, published Mar. 8, cited the need to “ensure support for the transfer of late-life assets.”

It said the government will publish a formal discussion paper “on the case for allowing transfers of tax history between buyers and sellers.”

It also will establish an advisory panel “to ensure appropriate scrutiny of the options,” reporting at the time of the autumn budget this year.

Deirdre Michie, chief executive officer of Oil & Gas UK, welcomed move.

“The current tax treatment of decommissioning makes it harder for existing owners to sell mature assets and leads to lengthy, complicated deals which slow down activity in the basin,” she said. “Recent deals highlight the opportunities in the basin, but more transactions could be achieved if this issue is resolved.”

She said the discussion paper is due Mar. 20.

Oil & Gas UK also welcomed a “statutory instrument” submitted to the House of Commons extending the definition of investment expenditure to specified categories of operating and leasing outlays.

“This will encourage further investment on the UK Continental Shelf,” the group said. The move complies with a commitment in the 2015 summer budget “to broaden the scope of the investment and cluster area allowances to include expenditure on additional activities,” it explained, noting companies can generate the allowance for any allowable expenditure since Oct. 8, 2015.