Oil firms hit by tax adjustment

Offshore oil and gas firms will have to pay £1bn ($1.9bn) more in tax next year as a result of changes to the tax regime included in Wednesday’s Budget.

Chancellor Gordon Brown is to raise the extra money from North Sea operators by bringing forward corporation tax payments to 2005-6.
The measure will not increase the overall tax burden on the industry but firms will incur extra financing costs.

The huge profits made by oil firms have prompted calls for a windfall tax.

Fiscally neutral

The industry estimates that the measure will result in firms having to pay £25m in additional annual financing costs.

However, it denied that the move – which will be used to fund spending pledges for pensioners and housebuyers – amounted to a windfall tax.

“The chancellor benefits from getting tax earlier but the overall tax take is the same over the lifetime of the North Sea,” Michael Tholen, economic director of the UK Offshore Operators Association, told the BBC.

“He [the chancellor] will get more money now and a little bit less later.”

BBC