Enabling transferable tax history in the upcoming Autumn Budget would attract new investors and help unlock more deals in late life assets in the North Sea.
This could prolong the life of mature fields by many years and save Treasury an average of £10 million per asset in deferred tax relief.
That’s the view of Oil & Gas UK which wants the chancellor this week to transfer tax from seller to buyer when North Sea assets are sold on.
Currently the history of tax paid remains with the asset’s original owner even if the asset changes hands. But tax paid has a bearing on final decommissioning costs when the asset comes to the end of its productive life.
Oil & Gas UK analysis of 23 UK asset transfers since 2011 reveal that deals have extended field life by almost five years on average. Some fields have gone on producing for up to an extra 14 years.
A spokesman for the Aberdeen-based trade association said: “Mature assets are attracting interest from investors who see the competitive opportunity that the North Sea continues to offer.
“Transferable tax history would boost the number of mature-field deals in the North Sea. This, in turn, would help bring fresh investment into the basin, generate new production and provide extra tax revenues for Treasury.
“However, the current tax position is an obstacle to potential deals and that is why it is important that the chancellor takes action to support further deals.”
20 Nov 2017