UK Budget Produces Rabbit from Hat for Upstream

UK finance minister Philip Hammond has promised to ease asset transfers offshore, in a bid to fulfil the government's objective of maximising economic recovery from the continental shelf. In his March 8 Budget statement to parliament, he promised a discussion document on allowing the tax history to be transferred from seller to buyer would be published March 20, and a new expert panel is to be established to help scrutinise the issues over the summer.

Responding warmly to the statement, Oil & Gas UK said that the definition of investment expenditure will be extended to certain categories of operating and leasing expenditure, encouraging further investment and it makes good on the government’s commitment at Summer Budget 2015 to broaden the scope of the Investment and Cluster Area allowances to include expenditure on additional activities. The economic benefits of the extension are backdated, so companies can generate the allowance for any allowable expenditure since 8 October 2015."  

In its response, OGUK CEO Deirdre Michie (pictured below) said: "The publication of the statutory instrument giving further details of how the existing Investment Allowance will be extended to operating expenditure is also good news and we look forward to reading the detail." She said that confidence in the fiscal regime through the finance ministry's “Driving Investment plan” underpins the UK's competitiveness.

(Credit: OGUK)

"Industry is committed to ensure that the UKCS provides a globally competitive business environment in which our highly skilled supply chain can thrive. The industry is slowly emerging from a very challenging period and it is crucial that the North Sea is successful in attracting investment in the near-term to sustain production and stimulate new activity.” 

On March 7, OGUK had said in its Business Outlook Report 2017 that it had asked the finance ministry to ease asset transfers offshore.

Commenting on the Budget, a partner at global law firm Norton Rose Fulbright Chris Bates said the finance minister had responded to calls “for its rabbit out of the hat,” but that the solution would not be immediate. While the Budget was "not a complete overhaul," Bates said it is hoped any new measures will "alleviate the current bottleneck around the transfer to of mature fields in the North Sea to late life specialists.” This, he said, was key to keeping North Sea oil fields as productive as possible for the longest time possible.

He said the government appears "ready to take on the challenge of attracting specialists, but finding a solution acceptable across the whole industry and within government will take time."

William Powell