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UK government swoops on North Sea windfall profits

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26 May 2022

UK government swoops on North Sea windfall profits

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

    • 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 8 images and tables including:

  • UK marginal petroleum tax rate 1975-2022
  • UK petroleum tax rates and capital allowances
  • UK government versus company share
  • Transfer of cash flow from companies to government (2022/2023 fiscal year)
  • Profit and tax breakdown current versus new
  • Top producers: UK upstream in a global context
  • UK capex committed to new projects by year versus tax rate
  • Illustrative example of smooth sliding scale for a progressive tax rate

What's included

This report contains:

  • Document

    UK government swoops on North Sea windfall profits

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