Shale gas — tax breaks and planning guidance certainty
On 19 July 2013, HM Treasury published a consultation on a new fiscal regime for shale gas. On the same day, and to much less fanfare, the Department of Communities and Local Government issued guidance on how shale gas (and other onshore oil and gas) developments should proceed through England’s planning system. With the former set to provide substantial financial incentives and the latter providing clarity on a problematic area, it is clear that the government is looking to push the shale gas industry on to the next level.
Aware of the potential benefits an established shale gas industry can bring to a country that is set to be burdened by the requirement of high-net-gas imports (expected to be 76 per cent of demand by 2030), the government has designed a tax regime that it describes as ‘generous’, in an effort to support the industry at a stage when costs are likely to be high and risks great.
Currently, the shale gas industry is subject to the ‘ring fence’ tax regime for oil and gas. Profits are subject to an initial ring fence corporation tax (RFCT) of 30 per cent and a supplementary charge (SC) of 32 per cent. However, support is provided through ‘field allowances’ (which effectively removes the SC) for those projects that are economic but commercially marginal…
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