GUIDANCE FOR JOURNALISTS, NEWS EDITORS AND SUB-EDITORS [OPERATIONAL NOTE – NOT FOR PUBLICATION]
Offshore Energies UK would like to thank journalists covering (Q1) company results published by energy companies, including some of our members. This background note is to help with that coverage.
In particular, we want to address a common confusion among those who have contacted us regarding the relationship between global profits and UK taxation.
This confusion arises from the assumption that profits from global operations are subject to UK taxes.
This has led some journalists to suggest that UK domestic taxes like the Energy Profits Levy (or windfall tax) are applicable to the global profits announced by companies based or operating in the UK.
This assumption is incorrect. Here’s why:
- Most multinational businesses are not single companies but groups - with multiple subsidiaries - Some of those subsidiaries will be generating their profit outside of the UK. • Subsidiaries based in other countries will pay taxes – but in those countries. - All companies produce audited annual accounts for the group as a whole and for each subsidiary. - Group level accounts cover overall profits (or losses) from all countries where a given business is operating. - Some companies also publish quarterly unaudited accounts. This is obligatory if they are US-listed. - Global tax agreements mean companies cannot be taxed twice on the same income in different countries. - They also say profits cannot be diverted from e.g. the UK to low-tax paying regions. - For oil and gas producers this means the relevant UK taxes (Corporation Tax, Supplementary Charge and the EPL) apply only to profits made on oil and gas extracted in UK waters. - The combined rate of these taxes is 75% - the highest rate for any UK sector. - These UK taxes will apply to profit earned by foreign-owned companies operating in UK waters. - They will not apply to profit earned by subsidiaries of UK companies operating overseas.
Key Points:
1. It is inaccurate to suggest that UK taxes are applicable to global profits. 2. The UK Treasury can only tax a company’s profit from its UK operations. 3. It cannot tax revenues generated in other countries – because they have already been taxed in those countries. 4. For larger oil and gas producers, UK operations will typically be just a fraction of their overall portfolio.
Notes to editors:
Issued by [email protected]
Offshore Energies UK is the leading trade body for the UK’s offshore energies industry. Its membership includes over 400 organisations with an interest in offshore oil, gas, carbon capture and storage, hydrogen, and offshore wind. Working together with its members, it is a driving force supporting the UK in ensuring security of energy supply while helping to meet its net zero ambitions.
Offshore Energies UK, 2nd Floor, Cannongate House 62-64 Cannon Street, London , EC4N 6AE
