Tax relief could boost oil and gas industry

Tax relief changes could benefit the North Sea oil and gas industry by freeing up billions of pounds for investment, the Government has announced.

A consultation has been launched to give the industry more certainty over the level of tax reliefs available when decommissioning old offshore platforms.

Last week a report from Oil and Gas UK warned that uncertainty surrounding reliefs was deterring new long-term investment into the UK, and making it difficult for oil and gas assets to be traded.

The Government pledged to deliver greater certainty to the industry in the March Budget.

Launching the consultation, economic secretary to the Treasury Chloe Smith said: "By providing certainty on decommissioning costs through signing legally-binding deeds with industry, we are paving the way for billions of pounds of new investment in the North Sea."

"This is great news for jobs not just in the North Sea, but across the UK. These changes will also benefit the taxpayer, with increased tax revenues in the long term boosting the public finances."

The new Decommissioning Relief Deeds will specify the levels of relief that companies will receive, and also give certainty on the levels of relief available for companies that are liable for the decommissioning costs of another defaulted party.

Firms operating in the North Sea are estimated to invest more than £11.5 billion in the country this year, making the sector the UK's largest industrial investor.

Oil & Gas UK's economics director Mike Tholen welcomed the consultation, saying it would provide long term investment of up to £40 billion and provide the Exchequer with an extra £1 billion pounds of tax revenues in the first five years alone.

The Treasury is aiming to give companies the ability to claim at least half of their decommissioning costs back in tax relief when paying for the costs of a defaulted company. It says the costs to the Treasury would be recouped from future investment into the industry.