Oil and gas taxation

UK resident companies, and companies with a UK permanent establishment, are potentially subject to four levels of tax on their profits from oil and gas exploration and production:

1. •

   corporation tax

2. •

   the supplementary charge (the SC)

3. •

   petroleum revenue tax (PRT) (albeit at 0% from 1 January 2016), and

4. •

   from 26 May 2022, the energy profits levy (the EPL). At Autumn Budget 2024, the government announced that the EPL will end on 31 March 2030, extending its maximum lifespan by two years.

Corporation tax and the SC are applied to the ‘upstream’ (exploration, development and production) profits of the company as a whole. Corporation tax is applied to oil and gas profits at a higher rate than applies to other activities. The profit base for the SC is the corporation tax profit base adjusted for financing items and investment allowances.

PRT is applied on an oil field by oil field basis, and is deductible against corporation tax and SC profits. The rate of PRT was reduced to zero for periods ending after 31 December 2015, although the tax has not been abolished so that