Contribution to the UK Economy

Tax revenues

The economy has benefited from over £230 billion (2006 prices) in UKCS taxes since 1968 (see Appendix A for an explanation of the tax regime). In addition, taxes are collected on activities induced by the industry’s expenditure on investment and operations. Figure 6 shows how tax receipts almost doubled from £5.4 billion in 2004-05 to £9.8 billion in 2005-06 as a result of high commodity prices, as well as the accelerated payment of Corporation Tax announced in March 2005. However, several factors caused tax revenues to be lower than forecast at £9.1 billion in 2006-07. Despite oil prices remaining high and the increase in the Supplementary Charge to Corporation Tax announced in December 2005, much higher costs, falling gas prices and declining production reduced the industry’s margins and, therefore, taxable income. It is projected that continued cost pressures, lower gas prices and declining production will result in a further reduction in tax receipts in 2008-09.

Figure 6: UKCS Taxes 1991-2008