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USA Changes to Energy Profits Levy (EPL) for oil and gas
On 29 July, the new UK Government announced the widely expected changes to the Energy (Oil and Gas) Profits Levy (EPL) which had been signalled in their manifesto.
An overview of the EPL changes
In summary, the changes are:
Rate Increase: Starting from 1 November 2024, the EPL rate will rise to 38%. This brings the headline tax rate for upstream oil and gas activities to 78%.
Extended Duration: The period during which the levy applies will be extended to 31 March 2030, but the Energy Security Investment Mechanism (ESIM) remains in place to give businesses confidence that EPL will no longer apply if prices fall.
Investment Allowances: The Government will remove the main 29% investment allowance for qualifying expenditure incurred on or after 1 November 2024. The 80% decarbonisation investment allowance will remain in place. Additionally, the extent to which capital allowances can be considered in calculating levy profits will be reduced.
These changes were widely expected. For the oil and gas sector, it means higher tax rates and reduced investment allowances, although it is good to see the decarbonisation allowance being retained. Further details will be announced in the Budget on 30 October.
If you have any questions or want to understand how HMRC’s announcement affects your business, please speak to your usual contact or get in touch with our expert Jayne Harrold.
Environmental tax
Keep up to date with the changing Environment taxes for your business
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By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
Tax legislation
Tax legislation is that prevailing at the time, is subject to change without notice and depends on individual circumstances. You should always seek appropriate tax advice before making decisions. HMRC Tax Year 2024/25.
