Question to the HM Treasury:

To ask His Majesty's Government what is the projected total cost to the Exchequer of tax reliefs available for the decommissioning of North Sea oil and gas infrastructure over the next decade; and how much has been claimed in tax reliefs for this purpose since 2010.

Companies operating oil and gas fields in the UK and on the UK Continental Shelf (UKCS) are required to decommission infrastructure at the end of a field’s life. Tax relief is a normal part of the corporate tax system where there are genuine costs to companies, and so providing tax relief on decommissioning recognises the heavy “end of life” cost for oil and gas projects.

Estimates of the projected total cost of decommissioning relief are published on gov.uk [1]. This indicates a provision of £5.7 billion based on estimated tax repayments of Petroleum Revenue Tax (£2.1 billion) and offshore Corporation Tax (£3.6 billion) by HMRC to companies over the period to 2067 due to losses from decommissioning expenditure. Additionally, the government forecasts a cost of £5.1 billion in the form of foregone offshore Corporation Tax due to decommissioning expenditure being deductible for tax purposes in this regime.

Estimates of the cost of decommissioning tax relief are published at tax relief statistics gov.uk [2] . The latest structural tax relief publication indicates that tax relief for decommissioning expenditure under the Petroleum Revenue Tax regime amounted to £140m in 2019-20, £270m in 2020-21, £350m in 2021-22, £340m in 2022-23, £600m* in 2023-24 and £450m* in 2024-25. Tax relief for the same expenditure under the offshore Corporation Tax regime amounted to £590m in 2019-20, £450m in 2020-21, £560m in 2021-22, £790m in 2022-23, £940m* in 2023-24 and £1bn* in 2024-25. Figures indicated by an asterisk are based on forecasted data.

Where data is available earlier publications set out the cost of tax reliefs for earlier periods. This shows that tax relief for decommissioning expenditure under the Petroleum Revenue Tax amounted to £250m in 2014-15, £420m in 2015-16, £310m in 2016-17, £220m in 2017-18 and £170m in 2018-19. Tax relief for the same expenditure under the offshore Corporation Tax regime amounted to £850m in 2014-15, £540m in 2015-16, £480m in 2016-17, £520m in 2017-18 and £580m in 2018-19.

[1] https://assets.publishing.service.gov.uk/media/66a8ebc349b9c0597fdb0784/HMRC_annual_report_and_accounts_2023_to_2024.pdf for HMRC’s provision related to future decommissioning tax relief payments, and https://www.gov.uk/government/statistics/government-revenues-from-uk-oil-and-gas-production--2/government-revenues-from-oil-and-gas-production-september-2024#exchequer-liability-from-decommissioning for foregone revenue estimates due to the tax deductibility of decommissioning expenditure

[2] https://www.gov.uk/government/collections/tax-relief-statics for the past 5 years and earlier statistics are also available on gov.uk ([ARCHIVED CONTENT] Structural tax reliefs - GOV.UK).