Economic Report 2018

Figure 38: Historical UKCS Production Tax Rate

1

100%

PRT-Paying

Non PRT-Paying

PRT with SC Relief

Non-PRT with SC Relief

90%

80%

PRT-Paying Fields (Sanctioned Before 1993)

2

70%

60%

50%

3

Non PRT-Paying Fields (Sanctioned After 1993)

40%

30%

Marginal Tax Rate on Profits

4

20%

10%

0%

5

1980

1985

1990

1995

2000

2005

2010

2015

Source: HMRC

Tax rates on UKCS production have varied significantly over the years. During the 1990s new fields typically paid similar rates of tax to other parts of the UK economy, although the offshore regime has always been ring-fenced from other onshore business. However, from 2002 the introduction of the supplementary change (SC) led to a divergence in the regimes compared to onshore businesses. Even today, taxes for offshore production are higher than for businesses elsewhere in the economy. Regular re-commitment to the Driving Investment Strategy helps attract new investors and enables the UK to compete in the global race for investment. The drive for international competitiveness is never-ending, and the changing nature of other basins’ fiscal regimes must also be considered alongside that of the UK. As an example, the recent reduction of federal taxes in the US will boost its fiscal competitiveness, potentially at the UK’s expense. The ultimate goal should be the development of a long-term roadmap that can span successive governments, building on current positive experience. In doing so activity can be maintained across the UKCS and, in the longer term, support the delivery of Vision 2035.

6

7

8

9

10

11

67