Chancellor of the Exchequer Jeremy Hunt is likely to announce a plan to limit the windfall tax on the profits of UK oil and gas companies in the coming days, according to a person familiar with the plans.
(Bloomberg) — Chancellor of the Exchequer Jeremy Hunt is likely to announce a plan to limit the windfall tax on the profits of UK oil and gas companies in the coming days, according to a person familiar with the plans.
The additional 35% levy on oil and gas companies will cease to apply if energy prices fall below a given level, the person said, confirming a Bloomberg report from March that said Hunt was considering the move.
The price “floor” would mean energy firms will not have to pay the extra tax if prices drop back in line with longer-term trends. It is unclear what that level will be. Without a floor, energy firms are due to pay the extra tax through to 2028.
The Treasury’s plan to soften the tax illustrates the government’s desire to spur investment and grow the economy, as well as make it less dependent on imports of oil and gas.
It could be a politically tricky move, with Labour pledging to block new North Sea oil and gas exploration and calling for an extension of the current windfall tax.
The UK’s oil and gas sector has been calling for the windfall tax to be scrapped when energy prices fall back to “normal levels,” warning that the levy is deterring investment.
Prime Minister Rishi Sunak brought the tax in last May in response to soaring prices exacerbated by Russia’s war in Ukraine.
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