UK government swoops on North Sea windfall profits

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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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