The Total Tax Contribution of the UK Oil & Gas industry

The oil and gas sector is the UK’s largest corporation tax payer, contributing 16.4% of total Government corporation tax receipts - more than many other significant industries combined. Our report shows that the industry’s contribution to UK tax revenues extends far beyond the taxes North Sea firms pay themselves. Including taxes they collect – such as employee taxes and for those with a downstream business, fuel duties, the Total Tax Contribution (TTC) is estimated at £30.1bn, which is 5.5% of total UK government tax revenues. If the taxes paid by companies in the supply chain were included, the figure would be even higher.

We were asked by Oil & Gas UK, the trade association for the UK’s upstream oil and gas industry, to look at the size of the contribution the oil and gas industry makes to the UK public finances and how the UK tax system impacts the industry. We used our TTC Framework to carry out the study. It provides a standardised methodology for companies to measure and communicate all the taxes and contributions that they pay. We had 28 Oil & Gas UK exploration and production (E&P) members participating in the research, representing 76% of the total UK oil and gas production for 2010/11, and 56% of Oil & Gas UK’s E&P membership. These companies provided data for the accounting year to 31 March 2011 which was extrapolated on a conservative basis across the entire membership. The study also looked separately at the activity of 18 supply chain members. We carried out a similar study for Oil & Gas UK in 2008 using the same methodology and we've therefore been able to compare the results.

The Budget measures announced by Government to the oil and gas industry tax regime are significant and have the potential to impact the industry commercially and its supply chain. It's crucial that the tax system in the UK is both predictable and internationally competitive. There needs to be a high level of engagement with Government, so that industry and Government can work together to create investment and employment opportunities and to maximise recovery of the UK’s oil and gas reserves. This study provides robust information and data and a clear understanding of the views of companies in the sector, in order to inform that dialogue.

If you have any queries regarding the study or would like to learn more about how the TTC Framework might help your business, please do not hesitate to contact Neville Howlett on +44 (0) 20 7212 7964.