UK Chancellor of the Exchequer George Osborne confirmed Wednesday that the UK’s oil industry would get a guaranted tax relief on the costs of retiring old rigs and platforms.
Osborne said that he wanted to ensure that the UK extracts the “greatest possible amount of oil and gas” from its reserves in the North Sea in future decades.
“We are today introducing a major package of tax changes to achieve this,” he said in his budget speech. “We will end the uncertainty over decommissioning tax relief that has hung over the industry for years by entering into a contractual approach.”
Over the weekend, sources at HM Treasury – which manages the UK’s finances – indicated that the Chancellor would announce a formal guarantee so that tax relief for retirement costs would remain in place for decades. There had been fears that there could be changes to current rules that see the government covering around half the costs of dismantling oil fields by making them tax deductible.
Osborne added in his speech that the UK government is also introducing new allowances. This will include a $4.75 billion (GBP 3 billion) new field allowance for large and deep fields designed to open up West of Shetland, the last area of the basin left to be developed.
