OT21705 | Energy Profits Levy: Introduction

With effect from 26 May 2022, the Energy (Oil and Gas) Profits Levy Act 2022 (EPLA22) introduced a new, temporary, levy on the profits of companies producing oil and gas in the UK or on the UK Continental Shelf. The levy applies to a company’s ring fence profits computed with a number of adjustments and is charged as if it were an amount of Corporation Tax.

From 26 May 2022 to 31 December 2022 the rate of the levy was 25%. From 1 January 2023 to 31 March 2028 the rate of the levy is 35%. The legislation relating to the increase (and associated consequential changes) is to be found at FA23\S1-3.

The levy includes an investment allowance for qualifying expenditure which can be used in the year of expenditure to reduce profits subject to the levy.

From 26 May 2022 to 31 December 2022 the rate of the investment allowance was 80%. From 1 January 2023 to 31 March 2028 the rate of the allowance is 29%.

The rate of the investment allowance for decarbonisation expenditure is 80%. See OT21750.

The legislation includes a sunset clause, which provides that the levy will no longer apply from 31 March 2028.