London: UK chancellor George Osbourne has unveiled his new budget for the fiscal year 2015, which comprises a number of changes to taxation for the UK maritime and offshore oil and gas sectors.
London-based shipping accountant Moore Stephens has welcomed the new budget, but says its positive effects remain to be seen.
“The measures just announced, together with those unveiled last year, underline the extent to which the UK government understands the strategic importance of the offshore oil and gas sector to the UK economy,” says Sue Bill, tax partner at shipping accountant Moore Stephens.
“They are good news for the offshore maritime sector, although it remains to be seen whether, in the light of the recent dramatic fall in oil prices, they will be sufficient to provide the industry with the boost it needs at a difficult time,” Bill says.
New finance for businesses and infrastructure projects should be easier to come by through new legislation included the Finance Bill 2015.
The bill includes a new exemption from withholding tax on interest on qualifying private placements (unlisted debt). As a result, this could mean companies will be able to raise finance without incurring withholding tax liabilities of up to 20% on interest payments, or dealing with the administration involved in claiming treaty relief. The security no longer has to have a minimum term of three years.
Exemptions from UK capital gains tax for tangible chattels (moveable personal property such as ships), which have never qualified for capital allowances, will no longer 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 a vessel on delivery without using it for trading purposes,” as Moore Stephens observes.
The budget has reduced the supplementary charge (the additional charge on a company’s ring-fence profits, excluding deductions for finance costs) to 20%, down from 32% before the release of the Autumn Statement.
For the oil and gas sector, petroleum revenue tax will be reduced from 50% to 35%, and will be used to provide £20m of funding for a programme of seismic surveys on the UK continental shelf.
The government has also created an investment allowance scheme, which aims to stimulate investment across the UK’s offshore oil and gas sector by simplifying the existing system of offshore field allowances.
Tax avoidance by multinationals will be tackled too. The new budget has narrowed the notification requirement under draft legislation for the new diverted profits tax (DPT) included in the Finance Bill 2015, which aims to minimise aggressive tax planning by multinational companies. More specific changes have also been made to clarify the rules for application of DPT on companies subject to the oil and gas regime.