Oil industry will claim tax rebates for dismantling platforms in rush to quit UK waters, energy boss says
PAUL HOMEWOOD
h/t Doug Brodie
If it was not bad enough already!
From the Telegraph:
Rachel Reeves will face a bill of up to £11bn for Ed Miliband’s North Sea shutdown, an energy executive has warned.
Brian Gilvary, the chairman of Ineos Energy, said Labour’s policies were creating an “extraordinary” bill for taxpayers because energy companies can claim tax rebates for shutting down and dismantling platforms.
When oil and gas companies decommission platforms and pipelines, they can claim about 25pc of the costs back from the Treasury. These costs were expected to be spread over decades but Labour’s windfall taxes and drilling bans mean companies are rushing to leave the North Sea – meaning accelerated demand for tax rebates, Mr Gilvary said.
“The 78pc tax rate imposed on UK oil and gas means that right now the industry is in a flight from the North Sea and towards decommissioning,” he said.
“The total costs are estimated at about £44bn and taxpayers will be liable for about £11bn of that, which is an extraordinary amount.”
Ineos operates the Breagh platform in the North Sea, 60 miles east of Teesside. It also runs the massive Forties Pipeline System which carries oil and gas from around 80 offshore fields back to UK shores.
Such infrastructure is vital to the UK’s energy security as well as generating billions of pounds for the Treasury, but the windfall taxes imposed by the last Conservative government and raised again under Labour have changed the economics of the North Sea.
It means many oil and gas fields have become uneconomic, said Mr Gilvary.
Full story here.
Decommissioning costs are of course legitimate business expenses. In normal circumstances, firms would make an ongoing provision for these costs, thus reducing declared profits and reducing corporation tax liabilities.
Successive governments have banned such deductions, as they would reduce their tax revenue. Instead we have the current arrangement where HMRC has to pay back the oil company at the end of the oil field’s life.
As INEOS point out, those repayments were expected to be spread over many years, offset of course by continuing tax revenues from new and existing fields.
Still, money does not matter where Net Zero is concerned!
SOURCE: Not a Lot of People Know That
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