The North Sea oil and gas industry will receive tax breaks from November next year in a bid to spur investment.
Chancellor Philip Hammond said a transferable tax history (TTH) for oil and gas companies will be introduced in the ‘Finance Bill 2018/19’ as part of his 2017 Budget announcements.
The tax breaks will be provided for old oil and gas fields sold to new owners, who are often put off buying the assets due to the high decommissioning costs.
The Chancellor hopes the “innovative” tax policy will encourage new entrants to bring fresh investment to a basin that still holds up to 20 billion barrels of oil.
The document states: “The government’s objective is to maximise economic recovery of its remaining oil and gas reserves, while ensuring the nation receives a fair return on its hydrocarbon resources.
“Extending the productive lives of late-life oil and gas fields is consistent with this objective as it could potentially lead to new investment, delaying decommissioning and supporting activity in the UKCS for longer.”
The government also intends to launch a technical consultation on allowing a petroleum revenue tax deduction for decommissioning costs incurred by a previous licence holder, which will support transfers of assets where the seller retains the decommissioning liability.
Mr Hammond has also pledged £540 million for electric vehicles and charging infrastructure, announced a tax hike for diesel cars which will finance a £220 million Clean Air Fund and is considering introducing a tax on single-use plastic items.