UK Chancellor George Osborne has unveiled a new tax measure to support investment in older fields by allowing companies to shield some income from the supplementary charge on their profits.
Under the new measure, companies can shield up to £250m of income in qualifying ‘brown field’ projects or £500m for projects in fields paying Petroleum Revenue Tax, from the 32% supplementary charge rate.
Osborne said the tax allowance brings good news for the North Sea, including new jobs and broader economic benefits.
"It will give companies the incentive to get the most out of older fields, creating jobs and delivering more revenue for taxpayers," said Osborne.
Oil & Gas UK was quoted by BBC Scotland as saying that the tax breaks could generate a further £2bn of investment.
Oil & Gas UK’s economics director Mike Tholen told BBC Radio Scotland’s Good Morning Scotland programme: "I think the chancellor is right to recognise that many of the older fields in the UK struggle to attract new investment, and this is a bit of a shot in the arm for them."
Friends of the Earth’s head of campaigns Andrew Pendleton said: "The chancellor should be urgently trying to wean the economy off fossil fuels, not subsidising its addiction."
Oil & Gas head Andrew Lister said the allowance will reduce tax rates from 62% to 30% on profits of up to £500m from certain new investments on existing North Sea fields.
"Although the proposed allowance is at a lower level than had been hoped for, this news will be welcomed by many oil companies and those involved in oil services businesses as it should unlock investment in the North Sea," said Lister.
Image: Tax breaks for older oil and gas fields in North Sea have been unveiled. Photo courtesy of: Merops.