Spring Budget 2023: energy taxes

No significant amendments were announced in relation to the rates or design of the energy ‘windfall’ taxes (energy profits levy (EPL) and electricity generator levy (EGL)) introduced last year.

Further detail was included in a policy paper in relation to the scope of ‘decarbonisation expenditure’ for EPL, to which the higher 80% rate of investment allowance applies. It seems that only capital expenditure will be included (whereas the ‘main’ EPL investment allowance also applies to certain operating and leasing expenditure). The policy paper references examples of qualifying expenditure including on assets relating to powering oil and gas production facilities from non-fossil fuel sources and reducing flaring of greenhouse gases. The Spring Finance Bill, published next week, will provide further detail.

The Budget documents also announced that a future Finance Bill will include measures to establish the tax treatment of payments made into decommissioning funds by oil and gas companies in relation to the repurposing of carbon capture, usage and storage projects. Details are not included, although the topic has been on the radar of industry for a number of years and this is a positive sign that measures will be introduced to incentivise such projects.