Gov­ern­ment shares plans for North Sea

In­dus­try: Late-life tax re­lief one op­tion

The Press and Journal (Aberdeenshire) - - NEWS - BY ALAN SHIELDS

The UK Gov­ern­ment has launched a dis­cus­sion pa­per on pos­si­ble North Sea tax re­lief for late-life assets.

It comes af­ter the Press and Jour­nal re­vealed ear­lier this month that the chan­cel­lor of the Ex­che­quer was to form an ex­pert panel to dis­cuss pro­pos­als for in­creas­ing pro­duc­tion and in­vest­ment in the strug­gling sec­tor.

The pur­pose of the new pa­per is to ex­tend the life of older assets and max­imise the amount of oil and gas re­cov­ered from the UK con­ti­nen­tal shelf while min­imis­ing the im­pact on the tax­payer.

The feed­back re­ceived by the Trea­sury will then be looked at in greater de­tail by the ex­pert panel and con­sid­ered by min­is­ters.

Es­ti­mates sug­gest that be­tween 10 and 20bil­lion bar­rels of oil equiv­a­lent (boe) are trapped un­der­neath the seabed in UK wa­ters.

But many of th­ese valu­able re­serves risk be­ing stranded for­ever due to high op­er­at­ing costs and the con­tin­ued low oil price.

Among the ideas put for­ward in the pa­per in­clude the pos­si­bil­ity of trans­fer­ring the tax his­tory with the sale of an as­set.

This would per­mit a seller to trans­fer a por­tion of their ring-fence cor­po­ra­tion tax pay­ment his­tory to the buyer of the as­set.

Cur­rently, this is not pos­si­ble as tax his­tory is at­tached to the com­pany who orig­i­nally paid the tax and can­not be trans­ferred.

The gov­ern­ment claims this could lead to a new wave of younger com­pa­nies tak­ing over from older prospec­tors and squeez­ing the last drop of re­serves out of historic fields.

The re­port states: “In the past few months, HM Trea­sury has had nu­mer­ous dis­cus­sions with stake­hold­ers on the in­ter­ac­tion be­tween tax and late-life as­set trans­ac­tions. This pa­per cov­ers the is­sues that were most fre­quently raised.”

The pa­per sets out nine ques­tions sum­maris­ing ini­tial feed­back from as­so­ci­ated in­dus­tries.

The pa­per states: “In the dis­cus­sions HM Trea­sury has had to date, it has been stated on nu­mer­ous oc­ca­sions by in­dus­try stake­hold­ers that some form of trans­fer­able tax his­tory (TTH) could as­sist some deals.”

The gov­ern­ment say any so­lu­tions must de­liver “suf­fi­cient and pro­por­tion­ate ben­e­fit" for the UK tax­payer.

Sub­mis­sions in re­sponse to the dis­cus­sion pa­per are to be sub­mit­ted be­fore June 30, 2017.

The gov­ern­ment will present its find­ings at the Au­tumn Bud­get 2017.

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