On 20 March 2015 the UK government announced a package of support for the oil and gas industry. A new Oil and Gas Authority is to have the power to promote the economic recovery of the industry. The new body would have the power to issue fines amounting to up to GBP 1 million and to revoke licenses. The body will be given the power to access relevant data so it can detect issues at an early stage.
The UK government held a consultation on the new Investment Allowance for the industry and is to include legislation on the allowance in the Finance Bill 2015. The new allowance is intended to encourage new investment in oil and gas while simplifying the current offshore field allowance system and thereby giving investors more certainty about the tax outcome of their investment. The allowance at 62.5% of the amount of investments will reduce the amount of ring-fence profits subject to the supplementary charge and will be available for investment expenditure after 1 April 2015.
As already announced in the budget for 2015 the Supplementary Charge is to be reduced from 30% to 20% and the Petroleum Revenue Tax is to be reduced from 50% to 35%. The government is also investing GBP 20 million in seismic surveys that aim to give a boost to offshore exploration.
These measures together with the Investment Allowance are aimed at driving new investment in the industry. The whole support package for the industry is expected to result in more than GBP 4 billion in new investment in the next five years and increase production by 15%.
