The oil and gas sector led the way in applauding Chancellor Philip Hammond’s 2017 budget after significant changes were made to the North Sea tax regime.
There was criticism, however, in some quarters that the Chancellor had failed to address details relating to R&D and business rates that could have helped stimulate growth further.
Deirdre Michie, chief executive of Oil & Gas UK, representing the offshore industry, stated: “We welcome the Chancellor’s response to our call to resolve the tax issues slowing down asset transfers and his recognition of the need to maximise recovery of remaining UK oil and gas reserves”
She also welcomed the forthcoming publication of the statutory instrument giving further details of how the existing Investment Allowance will be extended to operating expenditure.
Allowing assets to transfer when appropriate to new owners was key to encouraging more diverse investment, said Michie.
“The current tax treatment of decommissioning makes it harder for existing owners to sell mature assets and leads to lengthy, complicated deals which slow down activity in the basin. Recent deals highlight the opportunities in the basin but more transactions could be achieved if this issue is resolved,” she stated.
A formal discussion paper is due on 20 March, outlining case for allowing transfer of tax history between buyer and seller. Oil & Gas UK said this could enable a swift solution that could unblock asset deals.
Elsewhere, investement in STEM study and research was widely applauded but Stephen Cooper, head of industrial manufacturing at KPMG insisted more could have been done:
“It’s a shame the Chancellor didn’t use this opportunity to increase the value of the R&D expenditure credits regime to encourage manufactures to invest.”
Another leading accountancy firm working in the sector, Menzies, offered a similar qualified response to the new T level qualifications, with a spokesperson stating: “The introduction of T-Levels is good news but it will be some time before any benefit is felt by employers.
“It means that 13,000 qualifications will be replaced by just 15 and this will certainly bring greater focus, which will help employers to understand and recognise these new qualifications.”
Action on business rates did not extend to the removal of plant and machinery that could have added further to overall productivity
Terry Scuoler, chief executive, EEF
Manufacturers’ organisation EEF’s chief executive Terry Scuoler said overall the chancellor had responded to the challenge of raising productivity levels in the UK economy, adding that, aligned with industrial strategy priorities, the overall approach provided “much-needed cross-government coherence”.
But there was criticism from Scuoler regarding business rates: “Manufacturers will, however, be very frustrated by the positive headlines that might be generated by the action on business rates which did not extend to the removal of plant and machinery that could have added further to the overall productivity package.”
EEF chief economist Lee Hopley added that manufacturers who invest in rated plant and machinery at any point during the new rating list would continue to be hit by an increase in their business rates bills “as a result of the Chancellor’s lack of action on removing this today”.