UK Government to scrap windfall tax if oil and gas prices fall further

TheUK Government has announced it will remove the windfall tax on oil and gas companies should the price of the commodities continue to fall.

Ministers said that they would slash the current 75% tax on North Sea oil and gas profits back to its regular 40% if prices reach certain levels.

They said they would take the move if the average price of oil fell to or below 71.40 dollars per barrel for two consecutive quarters, and the average price of gas fell to under 54p.

On Friday morning Brent crude oil was trading at 75.38 dollars per barrel. UK gas prices were at around 64p per therm.

The windfall tax was first announced a year ago to ensure that oil and gas companies were paying what they owe and not benefiting unduly from Vladimir Putin’s war in Ukraine.

Oil and gas prices soared after the Russian president launched a full-scale invasion, bent on taking Kyiv in just three days.

But well over a year later Ukraine is now pushing to take back the territory it lost in the early days of the war, which started in 2014.

The Government said that the windfall tax will remain in place until 2028 as previously planned unless oil and gas prices fall to the levels needed for it to be revoked.

It said that the tax had so far raised £2.8bn since being implemented.

“While the levy included an investment allowance to encourage firms to continue to invest in oil and gas extraction in the UK, industry has warned that companies are cutting back on investment,” the Government said.

“This puts the long-term future of the UK’s domestic supply at risk, meaning we would be forced to import more from abroad at a time when reliable and affordable energy is a focus for families and businesses.”

It said that the tax will not be removed before 2028 if the Office for Budget Responsibility’s energy price forecasts are accurate.