A UK industry group is welcoming changes to UK fiscal policy that will allow buyers of offshore oil and gas fields to benefit from the past tax payments of sellers.
The autumn budget released last month by the chancellor of the exchequer includes a mechanism for transferable tax histories (TTH) in deals completed after Oct. 31, 2018.
“This will allow companies selling North Sea oil and gas fields to transfer some of their tax payment history to the buyers of those fields,” the government said. “The buyers will then be able to set the costs of decommissioning the fields at the end of their lives against the TTH.”
The provision assures new investors in UK Continental Shelf oil and gas of tax relief for decommissioning costs.
In an article published by several UK newspapers, Oil & Gas UK Chief Executive Deirdre Michie hailed the change as “news we had been hoping for from the autumn budget.”
Deals had progressed without TTH, she noted, adding, “They have taken months if not years to put in place and are very complicated indeed.”
The TTH mechanism, she said, will boost investment UKCS oil and gas and revenue for the government—“an extra £70 million in the short term by the treasury’s own estimates.”
It also will defer decommissioning along with the associated tax relief by prolonging production from mature fields.
“We’ve looked at past assets that have changed hands and seen them benefit on average from field-life extensions of nearly 5 years,” she said. “Several of the fields assessed are even expected to have their lives extended by 10 or more years.”
