The UK oil and gas industry welcomed a government move to raise the threshold for a tax break to support companies’ exploration and development in the North Sea.
The Treasury has said it will increase the annual rate of its Ring Fence Expenditure Supplement, an accounting tool that allows companies to increase their taxable income, to ten per cent from six per cent.
The change is expected to cost the government £50m per year by 2015-16, and would help companies working in marginal fields to benefit more from existing tax allowances and particularly a new field allowance created in the 2011 Budget.
“The government was clear at the Budget that it would engage with oil and gas companies, including to consider the case for further support for marginal projects,” said economic secretary to the Treasury Justine Greening.
“Today’s change demonstrates our commitment to ensure current allowances work effectively and equitably, and lays the groundwork for further constructive discussions on field allowances.”
The Oil and Gas Independents’ Association, which represents 34 oil and gas firms active in the UK continental shelf, said the change was “a positive first step” that would raise confidence among UK oilfield developers.
OGIA said the move would “contribute to securing future activity in the region, safeguarding jobs, improving energy security and ensuring foreign direct investment continues.”