Commenting on the impact of measures announced in today’s Budget on the UK Oil and Gas industry, Andrew Lister, Energy Tax Partner at KPMG, said: “Much to the disappointment of all in the oil and gas industry in the UK – and despite extensive consultation with them - the Chancellor confirmed in his Budget that the Government will go ahead with new rules that will increase the cost to companies in this sector of doing business here in the UK.
“The new rules, which were first trailed in December’s Autumn Statement, will apply to oil service companies that use assets of other group companies in the provision of their services.
“The increased costs of those service companies will need to be passed on to the UK companies searching for and extracting oil and gas from UK waters.
“The amount of tax estimated to be raised per annum from these proposals is around £130m. The impact on the oil industry is expected to be significant due to the low forecast margins for many new and incremental projects. This will weaken the UK’s competitive position for attracting investment.
“In addition to confirming these changes, a review of the oil and gas fiscal regime was also announced. It may be the opinion of many in the sector that the fiscal review would perhaps have been better served including these changes in its ambit.”
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