Oil firms get more in refunds than they pay in tax
THE Treasury has handed over £1 billion in tax refunds to oil giants over the past three years – signalling the decline of the Government’s North Sea tax haul just as the Chancellor prepares his Budget.
Figures compiled by The Mail on Sunday show HM Revenue & Customs triggered tax relief worth £1.2 billion to multinationals including Chevron, BP and ExxonMobil between 2015 and 2017. In some cases, the oil giants are now receiving more in handouts than they pay to the Treasury in corporation tax.
The figures reveal the extent to which the once rich resource for Government financing has become a drain on the Treasury as the payouts combine with a slump in profitability for North Sea oil rigs.
The Treasury’s North Sea tax takings tipped from a £2.1billion contribution in the 2014-15 tax year to an outflow of £300 million two years later, according to industry body Oil & Gas UK.
Industry experts hope rising oil prices will bolster takings in the year ahead. But oil companies are now in the process of dismantling oil rigs that first began drilling in the 1970s. The oilfields have produced about £350billion in revenue over the past five decades – landing previous governments with a massive windfall.
However, companies are now entitled to claim back some tax as they seek to cover the heavy cost of dismantling the rigs and cleaning up the sea bed – a process known as decommissioning. In 2016, Chevron’s tax refunds wiped out its corporation tax bill. It would normally have paid hefty corporation tax on its £64.8 million profit. But Chevron North Sea Limited reported a total tax credit of £108.3million, lifting its final profits to £173.1million. BP has received £527million in refunds from the Revenue since 2015, while Exxon, one of the largest oil companies in the world, has received £336 million.
In 2017 Esso UK, which is part of Exxon, paid just £1 million in tax. Repsol Sinopec, a joint venture with a subsidiary of China’s stateowned oil titan, Sinopec Group, has been given £125 million in refunds.
While Shell recently announced plans for a new development in the North Sea, Chevron has been retreating from the basin, saying over the summer that it was marketing its assets in the central North Sea. Chevron has also sold a 40 per cent stake in Rosebank, an oil and gas field west of Shetland, to Norway’s Equinor.
Oil & Gas UK has warned about the low level of drilling activity in the North Sea, saying in a recent report that there had been a 50 per cent decline over the past five years, which it described as a ‘serious concern’.
The Treasury said: ‘Decommissioning tax relief provides the industry with certainty to support financial planning. The latest Office for Budget Responsibility forecasts estimate that net oil and gas revenues will be £4.4billion over the next five years.’