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Fuel companies operating in the most difficult-to-exploit areas of the UK continental shelf are set to receive a multimillion pound financial boost, according to the Treasury, which has introduced secondary tax legislation to encourage development of remote gas fields.
The department said its new measure – applicable to the region west of the Shetland Islands, which is estimated to contain around 20% of the UK's remaining oil and gas reserves – could provide up to £160 million-worth of tax relief for each gas field that qualifies for the support.
The new incentive extends the field allowance, announced in Budget 2009 and introduced in Schedule 44 to Finance Act 2009, to remote deep-water gas fields found in the west-of-Shetland area.
The allowance works by exempting an amount of income from the supplementary charge. All profits generated by the qualifying field would still be subject to ring fence corporation tax (currently 30%). Supplementary charge (currently 20%) would still be due on profits in excess of the available field allowance.
The maximum allowance available for a qualifying field will be set at £800 million. At current tax rates this would reduce overall tax liability of the field owner(s) by up to £160 million spread over a minimum of five years from the year of first production from the field, said the Treasury.
Chancellor Alistair Darling remarked, ‘We must ensure that the UK taxpayer receives a fair return from the extraction of our national resources, and we are committed to maximising the economic exploitation of the UK's reserves.’
The legislation is subject to House of Commons approval, which will be sought no later than the end of March 2010.
