Accredited official statistics

Background quality report and guidance to oil and gas statistics September 2024

Updated 25 September 2024

Background Quality Report and Guidance: Statistics of Government revenues from UK oil and gas production

1. Contact

Statistical Contact: ct.statistics@hmrc.gov.uk

Media Enquiries: HMRC Press Office 03000 585 158;

hmrc.communications@hmrc.gov.uk

2. Background information

2.1 Taxes and tax rates

Currently there are 4 main taxes which apply to the exploration and extraction of oil and gas from the UK and UK Continental Shelf (UKCS). Details of the current taxes can be found below. Further information can be found in the Oil and Gas section of the GOV.UK website.

What is Ring Fence Corporation Tax (RFCT)?

This is calculated in the same way as the standard Corporation Tax applicable to all companies but with the addition of a ‘ring fence’ and the availability of 100% first year allowances for virtually all capital expenditure. The ring fence prevents taxable profits from oil and gas extraction in the UK and UK Continental Shelf being reduced by losses from other activities or excessive interest payments. The current rate of tax on ring fence profits is 30% and is set separately from the rate of mainstream (onshore) Corporation Tax.

Table 1 Ring Fence Corporation Tax Rate

Rate period	Rate for Ring Fence Corporation Tax
1 Jan 2002 to present date	30%

What is Supplementary Charge (SC)?

This is an additional charge on a company’s ring fence profits that is assessed on a similar tax base to RFCT but with no deduction for finance costs. Further information regarding the history of the rates of supplementary charge can be found in the table below.

Table 2 Supplementary Charge Tax Rates

Rate period	Rate for supplementary charge
17 April 2002 to 31 December 2005	10%
1 Jan 2006 to 23 Mar 2011	20%
24 Mar 2011 to 31 Dec 2014	32%
1 Jan 2015 to 31 Dec 2015	20%
1 Jan 2016 to present date	10%

What is Petroleum Revenue Tax (PRT)?

This is a field-based tax (as opposed to company-based tax, as in the case of RFCT) charged on profits arising from oil and gas production from individual oil and gas fields which were given development consent before 16 March 1993. With effect from 1 January 2016, the PRT rate was reduced to 0%. It has not been abolished, as companies can still generate repayment of historic taxes. PRT is a deductible expense in computing profits chargeable to RFCT and SC. Similarly, PRT repayments are treated as income in RFCT or SC tax calculations.

Table 3. Petroleum Revenue Tax rates

Rate period	Rate for Petroleum Revenue Tax
1 Jan 1975 to 31 Dec 1992	75%
1 Jan 1993 to 31 Dec 2015	50%
1 Jan 2016 to present date	0%

Energy Profits Levy

A new, temporary tax, set at 25%, on the profits from oil and gas production in the UK Continental Shelf - the Energy Profits Levy (EPL) - was introduced into the ring-fence oil and gas tax regime in 2022 to take effect on 26 May 2022 until the end of 2025.

In the Autumn Statement 2022, the government announced changes to the measure. These changes increased rate of the levy to 35% and extended the time that the levy applies to 31 March 2028. These changes took effect on 1 January 2023. Further information on this can found in the HMRC policy paper.

Spring Budget 2024 extended the EPL for a further year, to the end of 2028-29, as well as introducing the Energy Security Investment Mechanism (ESIM). ESIM is designed to give the oil and gas sector certainty that the EPL will not apply if prices fall below the levels set by the Mechanism. More information is available in the HMRC ESIM Policy Paper.

Further changes to the levy are due to come into effect from 1 November 2024. These include an increase in the tax rate to 38% and a new end date of 31 March 2030. Further details can be found in this HM Treasury policy paper.

Table 4 Energy Profits Levy Tax Rates

Rate period	Rate for Energy Profits Levy
26 May 2022 to 31 Dec 2022	25%
1 Jan 2023 to present date	35%

2.2 Decommissioning of UK oil and gas infrastructure

The Oil Taxation Act 1975 allows participators in an oil and gas field liable to Petroleum Revenue Tax to carry-back losses almost indefinitely against profits it has previously made from the field, or which previous participators in the field had made. This may result in the repayment of tax.

3. Statistical presentation

3.1 Data description

Government revenues from UK oil and gas production are published on a yearly basis. It is a full and official historical record of all tax and duties collected on profits from exploration and production operations of oil and gas; this covers both activity in the UK and on the United Kingdom Continental Shelf (UKCS).

The information is compiled from HM Revenue and Customs (HMRC) records of cash receipts and tax assessments. Pre-release versions of this publication are provided to senior HM Treasury (HMT) and HMRC officials before going live.

Table 1 is updated from the latest receipts data held on HMRC accounting records.

Revenues in Table 1 are presented on a cash receipts basis (recorded in the period payments are received by HMRC), as opposed to the National Accounts Basis used by the ONS (which approximates when underlying tax liabilities arise).

For Corporation Tax (CT), the initial payment of most instalments into HMRC group payment accounts are recorded as ring fence UK oil and gas receipts. But these figures can be revised when the group payments are distributed between liabilities for participating companies. HMRC asks selected companies to provide details of the proportion of their payments relating to non-ring fence activities. This ensures our initial recording of receipts relating to exploration and production operations is more accurate; but there are still likely to be small adjustments when liabilities are finalised. The CT receipts are recorded via a link to the HMRC CT system which holds all payment records.

In the tax year 2015 to 2016 changes were made to the collection of CT receipts data which enabled us to disaggregate total net CT between tax payments and repayments. Therefore, from the tax year 2015 to 2016 onwards we can provide a more accurate estimate of payments of RFCT and SC as payments are reported separately from repayments.

4. Statistical processing

4.1 Source data

The receipts information used in this publication are collected throughout the year and held in HMRC’s administrative data. These data are reported internally to management within HMRC on a monthly basis and cumulatively for the year. They also appear in the department’s monthly bulletin on HMRC tax receipts and National Insurance contributions.

4.2 Frequency of data collection

The data for CT receipts are downloaded every night into HMRC’s Corporation Tax administrative database (COTAX).

For Petroleum Revenue Tax (PRT), from 1 January 2016 the rate of was set to zero. In practise only repayments now occur, not receipts. Whilst repayments are made throughout the year, the majority occur during the months of January and July. HMRC issues assessments 5 months after the end of the chargeable period, 31 May and 30 November and any repayments arising are normally made 2 months later.

4.3 Data collection

Data on Corporation Tax receipts and liabilities are sourced from the HMRC COTAX administrative system. Receipts data are acquired when a company makes a Corporation Tax payment. All payments are made to HMRC electronically through either online or telephone banking; CHAPS; Bacs; Direct Debit; online by debit or corporate credit card; or at a bank or building society. A record of a company’s payment is captured in the COTAX system.

Data on PRT returns and claims are recorded on a standalone database managed by Large Business (LB). This was moved onto a new IT platform in 2020 and is designed to provide the functionality necessary to carry out all essential PRT tasks.

PRT receipts are processed by Corporate Finance (Shipley), through the Receipts Clearing System (RCS) and recorded in their Strategic Accounting Framework Environment (SAFE).

Figures for tax years 2022 to 2023 and 2023 to 2024 are provisional and subject to change in the future. This can occur if/when more timely and detailed data becomes available. For example, payments originally made in respect of a group of companies (group payment arrangements) can subsequently be re-allocated to individual companies within the group, including companies outside of the ring fence oil and gas regime.

5. Quality Management

Internal checks of statistics are done routinely by peers within the team, as part of formal monthly and annual reporting of RFCT and PRT receipts to senior management and for the monthly HMRC bulletin (see section 4.1). These quality assurance checks include ensuring consistency and alignment across tax receipts statistics published on different platforms.

6. Relevance

The statistical outputs cover the full population of companies and fields operating in the UK Continental Shelf and provide our users with factual content in this specialised area. These figures are presented in a fully transparent way, including all relevant historic data, to provide a good understanding of how much tax is collected, in nominal terms, under various tax heads applicable to oil and gas production profits.

Table 1 shows receipts from all taxes levied on exploration and production activities of UK oil and gas companies over the recent past. The table covers the most recent 6 years for which we have total receipts figures; this is currently tax year 2023 to 2024. The table is supplemented by chart 1 illustrating the changes in receipts over this period, split by type of tax.

Table 2 shows historic receipts from all taxes levied on exploration and production activities of UK oil and gas companies since 1968. No new data is given in this table in addition to that shown in table 1, Instead it provides data on historic taxes, levies and Royalty payments, the latter of which were abolished before tax year 2016 to 2017. Provision of this complete time series means recent trends in receipts can be compared to those seen historically. This is further illustrated in Chart 2 shown in the text, although It does not show the complete time series due to presentational limitations.

A formal consultation was run in 2012 and some users expressed a desire for breakdowns at regional and company level. HMRC have a duty to comply with strict rules on confidentiality and cannot make company information public. Regional data is not currently identified in the data gathering process and the vast majority of operations are offshore so there are difficulties in identifying regional activity.

Petroleum Revenue Tax (PRT) receipts data is subject to a yearly audit by the National Audit Office (NAO) and the published tables, charts and documents are quality checked and approved by HMRC senior managers and statisticians.

7. Accuracy and reliability

As the data is for the full population and there are no estimates included it is not subject to any sampling or measurement bias error.

Annual receipts data for RFCT and SC are presented both as the net amount and as a split between payments and repayments. For payments this split is estimated by using the aggregated total liability for RFCT and CT taken from the CT return and comparing them. However, for repayments the CT return groups both RFCT and SC liabilities together so calculating a split is not possible. To get round this, it is assumed that the split of repayments between RFCT and SC is the same for both payments and repayments.

The receipts data for the most recent 2 tax years shown in tables 1 and 2 are subject to possible revision, as more up-to-date data becomes available

8. Timeliness and punctuality

There is a difference in the timeliness of Corporation Tax receipts and liabilities data. This is due to when companies must pay their CT (receipts) compared to when they submit their CT return form (liabilities). This is also true for repayments.

Similarly, for PRT there is a difference in timeliness between receipts and liabilities data.

These sets of statistics are published in the summer, providing statistics for financial years that end in March. The reason for the delay is due in part to the time required to complete the complex analysis and quality assurance. It is also due to Company Tax returns being submitted late – passed the 31 March deadline. If publication was brought forward to earlier in the year, there would be many missing returns for which imputed data would be necessary. This would lead to less reliable statistics being released.

9. Coherence and comparability

The validity of the data can be measured at company level by comparing assessments with receipts. HMRC administrative systems record assessments and receipts independently, so these can be matched as necessary.

When HMRC introduced a new accounting system for recording PRT charges and receipts in 2006, a whole series of validation exercises were undertaken by HMRC’s statistical department to ensure accuracy of recording.

The PRT receipts statistics are agreed with HMRC Finance department and will inform the NAO audited National Accounts. Ring-fence Corporation Tax (CT) statistics also contribute to the overall CT receipts as stated in National Accounts.

The National Audit Office (NAO) undertake a yearly audit of PRT and CT receipts to ensure accurate recording. Recording of monthly PRT receipts is reconciled with figures produced by HMRC’s Finance directorate, as recommended by NAO.

These statistics are consistent with publications released by the Office for National Statistics (ONS), North Sea Transition Authority (NSTA, formerly known as Oil and Gas Authority) and the Office for Budget Responsibility (OBR).

10. Accessibility and clarity

The published tables appear under ‘Environment -Energy infrastructure - Oil, gas and coal’ area on the gov.uk website. The main release provides commentary and charts on both the content of the tables and the data and methodology used to prepare them. From 2021 these documents are published in HTML format to enable easy access. The underlying data are confidential so are not discussed in the releases. HMRC regularly reviews its statistical publications with a view to improve the content, accessibility, and presentation. In line with that, these statistics are regularly reviewed.

11. News release

There have not been any press releases directly linked to this data over the past year.

12. Publication

The tables and associated commentary are published on the Statistics of government revenues from UK oil and gas production webpage of GOV.UK.

13. Cost and burden

The data used to produce the statistics are 100% sourced from HMRC administrative data that would be compiled as part of normal business. Thus no additional costs are incurred to collect the data.

14. Confidentiality

Aggregation, rounding and suppression of small numbers are used to protect against statistical disclosure of taxpayer confidential data.