UK N Sea tax rules to be revamped, not abolished

Despite strong pressure from the oil and gas industry, the UK government has rejected calls to immediately abolish the North Sea Petroleum Revenue Tax (PRT) even though it announced a proposal Dec. 6 to shake up tax rules and decommissioning rules to encourage continuous investment in the mature area (OGJ Online, Dec. 7, 2007).

Dec 11th, 2007

Uchenna Izundu
International Editor

LONDON, Dec. 11 -- Despite strong pressure from the oil and gas industry, the UK government has rejected calls to immediately abolish the North Sea Petroleum Revenue Tax (PRT) even though it announced a proposal Dec. 6 to shake up tax rules and decommissioning rules to encourage continuous investment in the mature area (OGJ Online, Dec. 7, 2007).

Abolishing PRT immediately would create "a large number of winners and losers, damage investor confidence, and fail to secure a fair return for the UK taxpayer," the government said. It has proposed, instead, some reforms to the PRT regime, including reducing the administrative burden of complying with PRT and providing operators with PRT relief for decommissioning costs.

Trade organization Oil and Gas UK welcomed the suggestions but said that there are inconsistencies regarding the application of PRT to decommissioning liabilities and tax relief. The government is seeking comments on the suggestions by the end of January 2008.

It also has launched another consultation on the tax burden facing operators because of the fear that this is stopping forthcoming investment. The deadline to submit comments on this and other issues is June 2008.

Contact Uchenna Izundu at uchennai@pennwell.com.

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