Introduction Background Note
18.The UKCS is facing increasing challenges as an oil and gas producing basin, however there remain significant reserves to be recovered. Having engaged in extensive discussions on the question of fiscal incentives, the Government believes that a correctly targeted and designed incentive could, over the life of the UKCS, lead to an increase in investment and production.
19.This section introduces a ‘Field Allowance’, which is targeted on those commercially marginal, but economic, fields facing the greatest challenges within the UKCS. Those are smaller oil and gas fields, fields comprised of heavy oil and high pressure/high temperature fields.
20.Each field in these categories which is given development consent by the Department of Energy and Climate Change on or after 22 April 2009 will qualify for the new Field Allowance.
21.An amount of allowance is ‘activated’ each year based on the amount of income the company has from the qualifying field, up to a preset annual maximum.
22.The allowances are then pooled and offset against a company’s profits liable to the Supplementary Charge, i.e. the additional 20 per cent charge that companies with ring fence profits pay, on top of ring fence corporation tax.
23.Companies repeat the process each year until they have used up all their unactivated field allowance. Any unused allowances in the pool are carried forward for offset in future years. When a company disposes of an interest in a field which has unactivated field allowances, those allowances are transferred to the acquirer.