The UK oil and gas fiscal regime taxes profits earned by companies from the production of oil and gas on the UK Continental Shelf. The regime is kept separate to other taxes on commercial profit by the operation of a “ring fence” which prevents losses from other activities being imported into the regime. The current headline rate of tax is 40%, made up of the following taxes:
30% Ring Fence Corporation Tax (RFCT) – this is a tax on profits from exploration and production in the UK, largely on the same basis as normal corporation tax rules. This has not changed since the Supplementary Charge was introduced in 2002.
10% Supplementary Charge (SC) – this is an additional charge of 10% on adjusted ring-fence profits, excluding finance costs. It has remained unchanged since 2016 (when it was reduced from 20% to 10%). The rate peaked at 32% between 2011 and 2014.
0% Petroleum Revenue Tax – a field-based tax charged on profits arising from fields given development consent before 16 March 1993. It has been zero-rated from 2016 but not abolished to allow companies to carry back losses arising from trading and decommissioning.
[1] This can be claimed when the investment starts generating income. [2] Unlike the Supplementary Charge investment allowance, this can always be claimed in the first year (i.e. in the year of investment expenditure).