Insight
UK government swoops on North Sea windfall profits
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*Please note that this report only includes an Excel data file if this is indicated in "What's included" below
Report summary
After months of political pressure, the UK government is increasing the tax payable on oil and gas production. Instead of raising existing tax rates, it has added a third tax – the Energy Profits Levy – which will apply from May 2022. The overall tax rate will increase by 25% to 65% but an 80% investment allowance is deductible. The industry won’t like it; aggregate producer cash flow will be 18% lower in 2022 than it would have otherwise been. But neither industry nor government were anticipating US$100/bbl Brent and US$30/mmbtu gas. Corporate profits will still be higher than what would have been anticipated six months ago.
Table of contents
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Executive summary
- What has changed?
- Redistributing the windfall
- Which companies are most impacted?
- Industry reaction and the case for fiscal predictability
Tables and charts
This report includes the following images and tables:
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UK marginal petroleum tax rate 1975-2022UK petroleum tax rates and capital allowancesUK government versus company share
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Transfer of cash flow from companies to government (2022/2023 fiscal year)Profit and tax breakdown current versus newTop producers: UK upstream in a global contextUK capex committed to new projects by year versus tax rateIllustrative example of smooth sliding scale for a progressive tax rate
What's included
This report contains:
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