There are a number of measures in the UK Budget 2015 which will impact upon the energy, mining and renewables sectors, as summarised below:
- The UK corporation tax rate will remain at 20% for the year ending 31 March 2017.
- A number of measures have been introduced of relevance to the oil and gas sector:
- the government had previously announced that it would introduce an immediate 2% reduction in the rate of the Supplementary Charge from 32% to 30%, with effect from 1 January 2015. This will now be further reduced to 20%;
- as announced in the Autumn Statement the government will extend the ring-fence expenditure supplement from 6 to 10 accounting periods for all ring-fence oil and gas losses and qualifying pre-commencement expenditure incurred on or before 5 December 2013;
- as previously announced, the government is introducing an allowance to support the development of high pressure, high temperature projects. From 3 December 2014, an amount of profits equal to 62.5% of the qualifying capital expenditure a company incurs will be exempt from the Supplementary Charge;
- a new Investment Allowance has been announced to stimulate investment at all stages of the industry life cycle, simplifying the existing system of offshore field allowances, and provide investors with greater certainty;
- the government will reduce Petroleum Revenue Tax from 50% to 35%, and it will provide £20 million of funding for a programme of seismic surveys on the UK Continental Shelf.
- The government is to bring forward proposals for legislation in the next parliament for competitive tendering of on-shore electricity transmission infrastructure.
- As previously announced in the Autumn Statement, the Finance Bill 2015 will introduce R&D tax credit rates. The above line credit will increase from 10% to 11% and the SME scheme rate will increase from 225% to 300% from 1 April 2015.
- The government will introduce measures to improve access to R&D tax credits for smaller companies, including voluntary advanced assurances, new standalone guidance aimed specifically at smaller companies and a two year publicity strategy.
- As part of further measures to minimise aggressive tax planning by multi-national enterprises, Finance Bill 2015 will introduce a new Diverted Profits Tax (DPT) which will apply where multi-national enterprises divert profits from the UK. The DPT will be 25% and will apply from 1 April 2015. Some amendments to the draft legislation were announced in the Budget. Following consultation, the legislation has been revised to narrow the notification requirement which is welcome news. There are also some changes to the detailed rules. The Budget includes an announcement that there will be amendments to the rules for companies subject to the oil and gas regime.
- The Finance Bill 2015 give powers to HMRC to implement the OECD model for country by country reporting. These rules will require multi-national enterprises to provide high level information to HMRC on their global allocation of profits and taxes paid, as well as indicators of economic activity in each country.
- As already announced, the Finance Bill 2015 will include a new exemption from withholding tax on interest on qualifying private placements (a type of unlisted debt) to help the provision of new finance for businesses and infrastructure projects. The exemption may make it is easier for companies to raise finance without incurring withholding tax liabilities of up to 20% on the interest payments, or dealing with the administration involved in claiming treaty relief. It appears that following consultation the requirement that the security must have a minimum term of three years will now be removed.
- Changes will been made to the exemption from UK capital gains tax for tangible moveable chattels which are wasting assets and which have never qualified for capital allowances. In future the exemption will not apply if the asset has not been used in the owner’s business. This could mean that the exemption is no longer available where a company sells plant and machinery without bringing it into use for trading purposes.