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| Windfall tax to be suspended if energy prices drop | Windfall tax to be suspended if energy prices drop |
| (32 minutes later) | |
| The windfall tax on oil and gas firms will be suspended if prices fall to normal levels for a sustained period, the government has announced. | The windfall tax on oil and gas firms will be suspended if prices fall to normal levels for a sustained period, the government has announced. |
| Halting the windfall tax would cut the overall tax rate on energy firms from 75% to 40%. | Halting the windfall tax would cut the overall tax rate on energy firms from 75% to 40%. |
| A windfall tax is used to target firms which benefit from something they were not responsible for. | A windfall tax is used to target firms which benefit from something they were not responsible for. |
| It was introduced last year to help fund a scheme to lower energy bills for households and businesses. | It was introduced last year to help fund a scheme to lower energy bills for households and businesses. |
| Energy firm profits have soared recently, initially due to rising demand after Covid restrictions were lifted, and then because Russia's invasion of Ukraine raised energy prices. | Energy firm profits have soared recently, initially due to rising demand after Covid restrictions were lifted, and then because Russia's invasion of Ukraine raised energy prices. |
| But oil and gas prices have now come down from their highs. | But oil and gas prices have now come down from their highs. |
| How much windfall tax are oil giants paying? | How much windfall tax are oil giants paying? |
| What is the energy cap and what's happening to bills? | What is the energy cap and what's happening to bills? |
| In a statement, the Treasury said the windfall tax would remain until March 2028 but that the tax rate would fall if the average oil and gas prices fall to, or below, a set level for two consecutive three-month periods. | In a statement, the Treasury said the windfall tax would remain until March 2028 but that the tax rate would fall if the average oil and gas prices fall to, or below, a set level for two consecutive three-month periods. |
| The level has been set at $71.40 per barrel for oil and £0.54 per therm for gas. | The level has been set at $71.40 per barrel for oil and £0.54 per therm for gas. |
| Brent crude oil was trading at $75 per barrel on Friday morning, with gas prices at around £0.62. | Brent crude oil was trading at $75 per barrel on Friday morning, with gas prices at around £0.62. |
| Energy firms have been urging ministers to reduce the windfall tax, warning that it was causing companies to pull back investment. | Energy firms have been urging ministers to reduce the windfall tax, warning that it was causing companies to pull back investment. |
| In April, the UK's largest oil and gas producer Harbour said it would shed 350 UK onshore jobs as a result of the windfall tax. French oil giant TotalEnergies also said it would cut its planned 2023 North Sea investment by a quarter - £100m - because of the extension to the windfall tax. | In April, the UK's largest oil and gas producer Harbour said it would shed 350 UK onshore jobs as a result of the windfall tax. French oil giant TotalEnergies also said it would cut its planned 2023 North Sea investment by a quarter - £100m - because of the extension to the windfall tax. |
| The Treasury said its decision had reflected those concerns. | The Treasury said its decision had reflected those concerns. |
| It said any fall in investment "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 any fall in investment "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". |
| How does the windfall tax work? | How does the windfall tax work? |
| Prime Minister Rishi Sunak introduced the Energy Profits Levy in May last year when he was chancellor, with the rate set at 25%. | Prime Minister Rishi Sunak introduced the Energy Profits Levy in May last year when he was chancellor, with the rate set at 25%. |
| In the autumn, current Chancellor Jeremy Hunt announced it would increase to 35% from January 2023. | In the autumn, current Chancellor Jeremy Hunt announced it would increase to 35% from January 2023. |
| The levy applies to profits made from extracting UK oil and gas, but not from other activities - such as refining oil and selling petrol and diesel on forecourts. | The levy applies to profits made from extracting UK oil and gas, but not from other activities - such as refining oil and selling petrol and diesel on forecourts. |
| Oil and gas firms operating in the North Sea already pay 30% corporation tax on their profits and a supplementary 10% rate on top of that. | Oil and gas firms operating in the North Sea already pay 30% corporation tax on their profits and a supplementary 10% rate on top of that. |
| So with the windfall tax, that takes the overall tax rate faced by oil and gas companies to 75%. | So with the windfall tax, that takes the overall tax rate faced by oil and gas companies to 75%. |
| If it is eliminated, the overall tax rate on energy firms would return to 40%. | If it is eliminated, the overall tax rate on energy firms would return to 40%. |
| Trade body Offshore Energies UK welcomed the announcement, but warned the industry still faced challenges. | Trade body Offshore Energies UK welcomed the announcement, but warned the industry still faced challenges. |
| Its chief executive David Whitehouse said: "This is a step in the right direction, but many more will need to be taken to restore confidence to our sector. | Its chief executive David Whitehouse said: "This is a step in the right direction, but many more will need to be taken to restore confidence to our sector. |
| "We will now work closely with government and lenders to understand the detail of the measure and its effectiveness at unlocking investment." | "We will now work closely with government and lenders to understand the detail of the measure and its effectiveness at unlocking investment." |
| However, the possible suspension of the windfall tax was criticised by the Green Party. | |
| "The government seems happy to allow these huge corporations to not only wreck the climate but to profit off the back of the cost-of-living crisis which they themselves have contributed to," said Green co-leader Adrian Ramsay. | |
| "Instead, the government should be tightening the tax, closing the loopholes and ensuring the money raised helps people through the cost-of-living crisis and funds the sustainable green energy jobs in the renewable sector we urgently need." | |
| Greenpeace UK's climate campaigner, Georgia Whitaker, said: "Irrespective of what happens to the price of oil and gas, the tax these companies pay should be higher, permanently. | Greenpeace UK's climate campaigner, Georgia Whitaker, said: "Irrespective of what happens to the price of oil and gas, the tax these companies pay should be higher, permanently. |
| "This cash should be used to help insulate homes and transition the UK to cheap, clean energy, not fill the bank balances of already wealthy shareholders." | "This cash should be used to help insulate homes and transition the UK to cheap, clean energy, not fill the bank balances of already wealthy shareholders." |
| Related Topics | Related Topics |
| Tax | Tax |
| Oil | Oil |
| Oil & Gas industry | Oil & Gas industry |