Research and analysis

Evaluation of HMRC Oil and Gas First Year Capital Allowances for plant and machinery

Published 27 May 2025

Prepared by Ipsos for HM Revenue and Customs. The views in this report are the authors바카라 사이트� own and do not necessarily reflect those of HM Revenue and Customs

HM Revenue and Customs (HMRC) Research Report 783聽

1. Acknowledgements바카라 사이트�聽

The research team would like to thank all the representatives of the Oil and Gas Industry who gave their time to participate in this research. We would also like to thank the HMRC research team and the HM Treasury policy team for their guidance and support during the research and analytical process.聽

2. Glossary and abbreviations聽

Term	Description
Asset	An area of on- or off-shore land purchased for the production of oil and gas.바카라 사이트疢achinery used to extract oil and gas, such as rigs, drills and pumps.
Downstream	Referring to the processing and distribution of oil and gas, opposed to its extraction and production (see Upstream)
OPEC	Organisation of the Petroleum Exporting Countries
Petroleum Revenue Tax	Tax on the profits from oil and gas production in the UK or on the UK continental shelf.
RDEC	Research and Development Expenditure Credit, a tax relief for company바카라 사이트檚 research and development cost.
Ring Fence Trade	A virtual barrier placed around the extraction of oil and gas for tax purposes, as opposed to processing and distribution.
Supplementary Charge	An additional charge on an oil and gas company바카라 사이트檚 ring fence profits, introduced in 2002.
Upstream	Referring to the extraction of oil and gas, as opposed to processing and distribution (see Downstream).

3. Executive summary바카라 사이트�聽

3.1 Methodology바카라 사이트�聽

Ipsos interviewed respondents from 13 companies of a range of sizes that have recently claimed the First Year Allowance (FYA) for plant and machinery. The respondents were a mixture of senior tax and finance decision makers in the UK.바카라 사이트�聽

3.2 Implementation바카라 사이트�聽

Participants felt the FYA is easy to claim for businesses, causing little additional administrative burden as it is embedded within the annual tax return process. Participants felt that the FYA is easy to understand and that the rules about qualifying expenditure are clear. The FYA is also perceived to be stable, which aids long-term financial planning.바카라 사이트�聽

3.3 Outcomes바카라 사이트�聽

Participants were confident that the FYA had increased their investment in the UK oil and gas industry by making projects more financially viable. The relief is considered as part of all investment decisions, built into economic calculations about the current and future value of assets.바카라 사이트�聽

The relief was also seen as an important buffer against some of the economic headwinds in the North Sea, given that many of the oil and gas assets are mature and therefore require greater technical input to enable extraction. Furthermore, the relief was seen as necessary support given the risk of investments in the industry which could mean an investment achieves no return.바카라 사이트�聽

The respondents also identified various types of organisations that supply the oil and gas sector with plant and machinery. By being commissioned to deliver highly specific equipment, these organisations are also likely to benefit from the increased investment supported by the FYA.바카라 사이트�聽

3.4 Proportionality바카라 사이트�聽

There was little evidence of businesses that would have made the same level of investment without the FYA in place. Participants were clear that without the FYA, some projects were unlikely to be commissioned.바카라 사이트�聽

Being able to claim 100% of the Capital Investment in the first year was seen as a key benefit, as it ensures that return on investment is achieved more quickly.바카라 사이트�饪挴聽

3.5 Appropriateness바카라 사이트�聽

The relief was seen as very context-specific for the UK, given the ageing nature of the North Sea basin, as well as the fiscal environment. The relief was seen as appropriate for this context, but difficult to compare to other reliefs around the world, which took place in different contexts and operated through different mechanisms.聽

4. Methodology바카라 사이트�聽

4.1 Research context바카라 사이트�聽

In February 2020 the National Audit Office (NAO) recommended that HMRC introduce a more systematic evaluation programme of tax expenditures and reliefs. HMRC agreed and has put in place an evaluation programme, prioritising reliefs with a higher annual cost for earlier evaluation.바카라 사이트�饪挴聽

Oil and Gas companies involved in the exploration for, and extraction of, oil and gas from the UK and the UK Continental Shelf are eligible for a 100% FYA, which is a type of capital allowance.바카라 사이트�聽

The FYA for expenditure by oil and gas companies on plant and machinery operating in the ring fence allows 100% of qualifying expenditure on plant and machinery wholly for use in such exploration or extraction to be deducted in the year the expenditure is incurred when calculating taxable profits. In practice this means that most (if not all) capital expenditure on plant and machinery qualifies for immediate relief for such companies.바카라 사이트�聽

First Year Allowance programmes exist across a range of UK sectors and for the purposes of this report, 바카라 사이트榯he FYA바카라 사이트�, 바카라 사이트榯he relief바카라 사이트�, or 바카라 사이트榯he allowance바카라 사이트� refer to the FYA for Oil and Gas Plant and Machinery.바카라 사이트�聽

If the FYA is not claimed or is not available, qualifying expenditure can instead be deducted using writing down allowances (WDAs). WDAs provide relief for 100% of the expenditure but this is spread over time on what is known as the reducing balance basis. The reducing balance basis means that WDAs are calculated as a percentage of the balance of expenditure brought forward from the previous year (known as the pool balance) adjusted downwards for any disposals and upwards for any new qualifying expenditure. The rate of WDAs is either 25% or 10% for Oil and Gas trades depending on the nature of the plant and machinery on which the expenditure is incurred, compared to 18% and 6% respectively for non-Oil and Gas trades. The FYA greatly accelerates the relief available when compared to WDAs.바카라 사이트�聽

The relief was selected to be evaluated in line with HMRC바카라 사이트檚 published evaluation prioritisation criteria^{[footnote 1]}.바카라 사이트�饪挴聽

HMRC commissioned Ipsos UK to conduct a qualitative process evaluation of the FYA for plant and machinery, to understand how the relief affects company decision-making; companies바카라 사이트� experiences of claiming the relief; how the relief affects behaviour and how the relief compares to those available in other countries.바카라 사이트�饪挴聽

4.2 Research aims바카라 사이트�聽

The specific objectives of this process evaluation were to understand the impact of the relief in the following areas:바카라 사이트�聽

4.3 Outcomes: How the relief influences company decision-making:바카라 사이트�聽

• the extent to which the relief influences investment in plant and machinery among oil and gas companies바카라 사이트�聽

• how companies use the relief바카라 사이트�聽

• the extent to which the relief has benefits for claimants바카라 사이트�바카라 사이트�聽

• the extent to which the relief has benefits for the wider economy바카라 사이트�聽

4.4 Implementation: Companies바카라 사이트� experiences of claiming the relief:바카라 사이트�聽

• the ease or difficulty of claiming the relief바카라 사이트�聽

• role of agents in claiming the relief and the influence this has on claimants바카라 사이트�聽

• how the FYA for plant and machinery interacts with other reliefs바카라 사이트�聽

• what decisions are made at subsidiary and group level and how this influences the way companies use the relief바카라 사이트�聽

4.5 Proportionality: How the conditions of the relief influence company behaviour:바카라 사이트�聽

• whether there is any evidence that firms would have made investment anyway, without the tax relief (deadweight)바카라 사이트�聽

• what role (if any) the ring-fenced nature of the relief plays in decision-making바카라 사이트�바카라 사이트�聽

4.6 Appropriateness: How the UK바카라 사이트檚 relief compares to incentives and tax reliefs for the oil and gas industry in other countries바카라 사이트�바카라 사이트�聽

4.7 Methodology바카라 사이트�聽

A qualitative approach was chosen for the evaluation, as there is a relatively small population of companies that have recently claimed the FYA and this allowed for an in-depth exploration of the use and impact of the FYA in this population.바카라 사이트�聽

Sampling and recruitment바카라 사이트�聽

The sample was generated from an HMRC database of companies which had claimed the FYA since 2014, in order to ensure that interviewees at those companies would be able to speak about claiming the relief relatively recently. After duplicate database entries were removed, the final population consisted of 130 records of businesses who were eligible to take part.바카라 사이트�聽

This initial sample primarily contained company addresses and phone numbers, the database was then matched with other sources of information to provide more relevant contact details for individuals at those organisations. There were three further sources of information drawn upon:바카라 사이트�聽

• Ipsos used third party databases to enrich the sample via its sampling partners바카라 사이트�聽

• Ipsos commissioned a third-party recruitment company, iThoughts, to find additional contacts related to these companies using publicly available sources of information, such as Companies House바카라 사이트�聽

• HMRC바카라 사이트檚 Large Business Directorate was used to source individual contact details바카라 사이트�聽

The various methods were used to target senior decision-makers in finance and tax roles.바카라 사이트�饪挴聽

Ipsos sent postal invitations to the population of 130 eligible businesses to encourage them to participate in the research. This was then followed up with emailing and calling through specific contacts where these had been found from the additional data sources referenced above. Finally, HMRC emailed the relevant contacts, with the aim of encouraging those who had not already taken part.바카라 사이트�바카라 사이트�바카라 사이트�聽

Those who were willing to take part were briefly screened to confirm that their company had claimed the FYA recently and that their job role was relevant to the research. The evaluation consisted of subject matter spanning a broad range of financial matters, so some interviews contained more than one contact from the participating business to ensure that all relevant aspects of the research could be covered.바카라 사이트�聽

Recruitment aimed to target a mixture of company sizes, with the final breakdown of companies listed below:바카라 사이트�聽

Turnover band	Number of companies interviewed
拢10 to 99 million	3
拢100 to 999 million	4
More than 拢1 billion	6
Total	13

Fieldwork바카라 사이트�聽

Ipsos conducted 13 interviews between February and June 2022. Interviews were conducted via Microsoft Teams and lasted 45 to 60 minutes. A donation of 拢70 to a charity of the respondent바카라 사이트檚 choice was offered to thank participants for their time and contribution to the research.聽

5. Operating Context바카라 사이트�聽

This section explores the context in which the FYA for Plant and Machinery claimed by ring fence oil and gas companies operates, both in terms of the natural environment and the operating investment for businesses. Participants emphasised that the FYA needed to be understood within the context of the UK바카라 사이트檚 Oil and Gas industry to properly evaluate its effectiveness and appropriateness.바카라 사이트�饪挴聽

5.1 Natural environment바카라 사이트�聽

Across the interviews there was a strong theme of the North Sea (as well as other onshore locations in the UK) being some of the most heavily explored hydrocarbon basins in the world. There are fewer oil and gas reserves remaining to extract and those which were easiest to extract have already been developed. Extracting oil from the North Sea basin is therefore becoming more technically challenging and expensive, particularly relative to other oil fields around the world.聽

You바카라 사이트檝e got to take into account the age of the basin바카라 사이트� it바카라 사이트檚 a very mature basin, there바카라 사이트檚 less and less to be found, it바카라 사이트檚 more difficult to get it out.바카라 사이트� More than 拢1 billion turnover聽

This was seen to reduce the economic viability of UK extraction projects compared to recent decades, and also reduce the viability of projects compared to other basins around the world. As such, the FYA was seen as an important counterweight to maintain investment in the UK.바카라 사이트�饪挴聽

Furthermore, the comprehensive exploration of the North Sea means there are new, smaller, entrants to the market which are involved in acquiring second-hand assets from other providers.바카라 사이트�聽

I think that바카라 사이트檚 probably one of the features where you over the years have seen major or the super major oil companies gradually drift away from the UK and we바카라 사이트檝e seen a lot more new entrants. So, back in the sixties when the North Sea kicked off it was the super majors that were there, now it바카라 사이트檚 the more nimble low cost operators.바카라 사이트� More than 拢1 billion turnover바카라 사이트�바카라 사이트�聽

We bought all sorts of older assets or midlife assets바카라 사이트� in some cases, they could be a newer, small field tied to ageing infrastructure, so part of an ageing hub that maybe some small pool of oil was overlooked, and we바카라 사이트檙e redeveloping the well and tying it in. We could very well look at longer life, but I think, as a small company, we think in 10-year max time horizons, maybe 3 years if it바카라 사이트檚 a small pool.바카라 사이트� 拢100 to 999 million turnover聽

5.2 Operating environment바카라 사이트�聽

The maturity of the oil and gas industry means that the business infrastructure is well-established, making operating in the UK more straightforward.바카라 사이트�聽

The UK is very much a mature infrastructure and engineering basin, it바카라 사이트檚 world renowned. They바카라 사이트檝e exported know how for decades and as a result, you have well established companies, well established equipment and supply chains.바카라 사이트� 拢100 to 999 million turnover바카라 사이트�聽

This is important, as participants also reported that most oil and gas investments take between 2 and 10 years to generate a return on investment, with the figure typically somewhere in the middle. Respondents indicated that this was primarily because oil and gas is such a capital-intensive industry, with high costs for initial assets as well as the equipment required for operation. As such, financial decisions are made on the basis of calculating costs and benefits over the course of multiple years, which is inherently risky.바카라 사이트�饪挴聽

Some of the most common investment risks given by respondents were:바카라 사이트�聽

• fluctuations in the oil price, particularly as this is influenced not only by demand but also by decisions made by the Organisation of the Petroleum Exporting Countries (OPEC) and the wider economic context.바카라 사이트�바카라 사이트�바카라 사이트�聽

• difficulties predicting the exact quantity and quality of resource that can be extracted.바카라 사이트�饪挴聽

• unforeseen complications during the extraction process.바카라 사이트�饪挴聽

Given these difficulties, respondents indicated that it is important to keep as many other aspects of the investment environment as stable as possible, to increase the predictability of investments. The UK was seen to have a stable investment environment, partly because tax reliefs such as the FYA have been around for years and are seen to have broad support in the UK, meaning they are perceived as being unlikely to change.바카라 사이트�饪挴聽

The UK is an obvious choice in terms of its stable fiscal regime which makes it easy to plan and forecast. Investment decisions like this are planned out over certainly years, sometime decades and knowing what the rules are for what you바카라 사이트檙e going to do makes planning easier. The 100% first year allowance for upstream has been around for a long time and it바카라 사이트檚 like a starting point for our economics when we바카라 사이트檙e working things out. I would say it바카라 사이트檚 a large part of what made the UK appealing.바카라 사이트� More than 拢1 billion turnover바카라 사이트�바카라 사이트�聽

I was going to say some of the smaller projects, but all projects to a certain extent, there바카라 사이트檚 a risk attached to them. You can invest a lot of money and it may be that, for one reason or another, the project doesn바카라 사이트檛 produce beyond a year or 2 for some reason, there바카라 사이트檚 a failure or something. With that risk in the background, you would think very hard about if you weren바카라 사이트檛 able to utilise capital allowance pretty quickly, you바카라 사이트檇 think very hard about whether a project would be investable or not.바카라 사이트� 拢100 to 999 million turnover바카라 사이트�聽

6. Implementation: experiences of claiming the FYA바카라 사이트�聽

This section explores the process of claiming the FYA for Plant and Machinery claimed by ring fence oil and gas companies聽 and the extent to which participants found this process straightforward. It also looks at whether this process is managed in-house or is outsourced to suppliers.바카라 사이트�聽

6.1 Overview of experiences바카라 사이트�聽

Respondents universally identified that the process of claiming the FYA was straightforward, adding little burden to companies. We therefore found no evidence during this research that the process of claiming the FYA was making it difficult for companies to claim, or that the benefits of the relief would in any way be offset by the burden of claiming.바카라 사이트�聽

The straightforward nature of the claim process related to its design and the length of time it has been in place.바카라 사이트�聽

Design of the FYA바카라 사이트�聽

The claim process for the FYA is embedded within the annual tax return processes, meaning companies have systems and processes in place to gather the information needed. The annual return basis means that claiming adds little day-to-day burden for recording any qualifying expenditure. Participants reported finding it easy to identify capital expenditure that qualified under the remit of the relief. This was particularly the case for upstream-only companies, the majority of whose investment qualifies.바카라 사이트�聽

There was a perception amongst some respondents that the similar 100% relief for operating costs means accuracy of attributing capital expenditure is slightly less important. Both operating costs and capital expenditure will qualify for 100% relief, and therefore it is more of a technical matter as to what expenditure falls under each relief.바카라 사이트�饪挴聽

To claim it, there바카라 사이트檚 really just a couple of boxes in the tax return and you write the number in.바카라 사이트� More than 拢1 billion turnover바카라 사이트�바카라 사이트�聽

It바카라 사이트檚 not an issue because obviously we바카라 사이트檝e got 100% first year allowances, you바카라 사이트檙e getting the same relief for capital as you do for operating costs. So it바카라 사이트檚 not as important to distinguish exactly where the expenditure falls.바카라 사이트� 拢100 to 999 million turnover바카라 사이트�바카라 사이트�聽

It바카라 사이트檚 actually quite straightforward. From our perspective information gathering is straight forward. We have accounting systems where we record these costs, so they바카라 사이트檙e easily identifiable and we use commercial software which allows you to fill out the North Sea supplementary forms as well.바카라 사이트� 拢10 to 99 million turnover바카라 사이트�바카라 사이트�聽

Length of time the FYA has been in place바카라 사이트�聽

The length of time that the FYA has been in place means that the processes for claiming are embedded in the business processes. Accounting software often includes specific functionality for recording capital expenditure that qualifies under the FYA, meaning when the tax return and claim are prepared this can be easily run off.바카라 사이트�聽

6.2 Managing the FYA claims in house or outsourcing바카라 사이트�聽

Participants reported that as the process for the FYA is seen as an extension of the annual tax return they prepare, companies that outsource their normal tax affairs would also typically do so for the FYA, whilst those that managed their taxes in-house would also follow suit for the FYA.바카라 사이트�聽

Companies that managed the FYA in-house바카라 사이트�聽

The larger companies interviewed were more likely to manage the FYA in-house, due to having the need and capacity to run a team which dealt solely with taxation.바카라 사이트�聽

We do pretty much everything in-house바카라 사이트� we바카라 사이트檙e very big and we have a large tax team in-house.바카라 사이트� More than 拢1 billion turnover바카라 사이트�바카라 사이트�聽

Companies that outsourced the management of the FYA바카라 사이트�聽

Smaller companies were more likely to outsource the preparation of their annual tax return, and therefore, management of the FYA to external tax agents. These companies were unlikely to have the technical expertise required to manage tax in-house as the teams were smaller and there was not sufficient work to justify full-time staff in this area. For example, some of the smallest companies might only own one or two assets, making the management of the FYA relatively straightforward compared to claims for the larger companies. Many of these smaller companies functioned as investment vehicles as much as oil and gas companies and were not directly operating UK assets but providing capital for investment whilst another operating company was conducting work on the ground. These businesses employed small numbers of people and for these types of organisations, outsourcing was very likely.바카라 사이트�饪挴聽

We could probably do it in-house, but it would take a lot of time and we might need to hire someone바카라 사이트� but we never really consider that, as it바카라 사이트檚 not a massive cost to outsource. I think it바카라 사이트檚 also helpful to have another set of eyes on the accounts, and it바카라 사이트檚 pretty mechanical. The Excel engine we have is the same as the engine the 40 other companies or 50 other companies in the UK upstream world has.바카라 사이트� 拢100 to 999 million turnover바카라 사이트�바카라 사이트�聽

6.3 Comparisons with other UK reliefs바카라 사이트�聽

Respondents mentioned that they would typically claim for all reliefs that they were eligible for (including the FYA) to maximise the financial viability of their projects. The other reliefs mentioned during the interviews were:바카라 사이트�바카라 사이트�聽

• Research and Development Expenditure Credit바카라 사이트�聽

• Mineral Extraction Allowance바카라 사이트�聽

• Investment Allowance for oil and gas companies바카라 사이트�聽

• Decommissioning expenditure바카라 사이트�바카라 사이트�바카라 사이트�聽

Whilst all of these reliefs, as well as the FYA, were strongly valued by participants, one business had some minor concerns about the complexity of having multiple reliefs in parallel, and the additional burden that this caused from an administrative perspective. However, despite this, the FYA was seen as simpler than the other reliefs available to UK oil and gas companies because of the simplicity of identifying what is included. In this way, the relief was seen as easier than the Research and Development Expenditure Credit, for example, because defining Research and Development is harder and can change. In addition, the FYA claiming process being so directly related to the annual tax returns process was also reported to make it easier to claim than other reliefs.바카라 사이트�聽

7. Outcomes: Impact on investment decisions바카라 사이트�聽

This section covers the decision-making process for investment, as well as how the FYA for Plant and Machinery claimed by ring fence oil and gas companies is considered within this.바카라 사이트�聽

7.1 How investment decisions were made바카라 사이트�聽

How investment decisions were made depended on the type of investment which was being made. Across the interviews, three ways in which businesses made capital investment in plant and machinery were identified: replacement of plant and machinery, new investment in an owned asset and investing in new assets.바카라 사이트�聽

Replacement바카라 사이트�聽

This type of investment covered plant and machinery which needed replacing, due to breaking or wearing out, to ensure that extraction could continue. Decision-making about this type of investment was made locally and quickly, to ensure that the asset could continue to operate.바카라 사이트�聽

Participants reported that much of their capital expenditure investment was replacing plant and machinery, rather than for a new asset. This means that oil and gas companies have regular ongoing capital expenditure, outside of investments in new projects or assets.바카라 사이트�饪挴聽

New investment in an owned asset바카라 사이트�바카라 사이트�聽

This type of investment covered new plant and machinery, to enhance production or to access further oil and gas reserves, extending the asset바카라 사이트檚 life and production capabilities. These decisions would be made by senior management, locally or globally, depending on the business type.바카라 사이트�饪挴聽

Participants set out that oil and gas businesses had more investment opportunities than they could make, so these had to be prioritised. All businesses interviewed were operating in at least one other country, in addition to the UK, meaning that UK projects were competing against those in other countries for investment. Economic modelling, to understand the financial outcomes of investment in a particular project, was central to this decision-making.聽聽

Investing in new assets바카라 사이트�聽

In these cases, firms were buying an operational asset, including its plant and machinery, from another business. As part of the sale, the value of the plant and machinery would be agreed, and the FYA would be claimed on this value. These decisions were made by the senior management of the business. In our sample, this type of investment was made by smaller companies which were acting as investment vehicles, rather than larger firms.바카라 사이트�聽

7.2 Role of the FYA in investment decisions바카라 사이트�바카라 사이트�聽

Oil and gas companies were using economic models to inform decision-making about investments, and to assess the relative profitability of project opportunities against each other.聽

Oil and gas companies decision making process聽

聽

The image shows a diagram of an example of companies decision making process;聽聽

• local company requires investment to increase, enhance or sustain oil extraction聽

• economic models are developed to inform projected returns, factoring in oil prices, political risk and cost of extraction聽

• decision taken about whether to progress the project, dependent on available project performance relative to other global opportunities聽聽

Participants reported that the FYA was used in the development of these models and therefore played a role in assessing the potential financial outcomes of investing in a particular project in the UK. For a project to go ahead, the potential financial outcomes had to show a particular return on investment and be competitive relative to other opportunities. The FYA helped to improve overall project profitability, and therefore competitiveness and likelihood to go ahead.바카라 사이트�聽

We have our models for asset level, for group level, for the tax submission, and they produce outputs and then we take a view on the technical and financial downside. Again, if we had to guess바카라 사이트� there are probably a few projects we would not have sanctioned바카라 사이트� had it not been for this [the FYA].바카라 사이트� 拢100 to 999 million turnover business聽

An additional benefit of the FYA model was its simplicity. This made it easier for businesses to explain to shareholders.바카라 사이트�聽

UK investment opportunities were competing against other international opportunities. Where these opportunities were in territories where the oil and (or) gas reserves were larger and (or) extraction was technically more straightforward, the FYA (and other reliefs) played a stronger role in ensuring investment in the UK was competitive. As such, participants believed that some form of tax relief was necessary to securing investment in the UK and if the FYA did not exist, something similar would be needed in its place.聽

The company that I worked for in the UK before my current role had operations in the Netherlands, Egypt, and they had operations elsewhere and you had to fight for the investment to come to our projects rather than other countries.바카라 사이트� More than 拢1 billion turnover聽

8. Outcomes: Wider impacts of the FYA바카라 사이트�聽

In addition to the impacts of the FYA for Plant and Machinery claimed by ring fence oil and gas companies (the FYA) on oil and gas companies directly, the evaluation also sought to understand whether and how economic benefits for oil and gas companies are passed on through the economy. This was examined by asking respondents about their relationships with suppliers, to understand if and how benefits of the FYA to oil and gas companies are felt by the companies they buy goods and services from.바카라 사이트�饪挴聽

8.1 Suppliers of equipment바카라 사이트�聽

Respondents did not see the FYA as having specific impacts on the suppliers that they used or projects which they commissioned. Rather, the FYA fed into the wider viability of projects, which subsequently benefitted suppliers providing plant and machinery.바카라 사이트�饪挴聽

There are really 2 phases I suppose. The first phase is the decision do you want to do the project and that바카라 사이트檚 what involves all of the economics, the business decisions, the getting a flavour of what prices are, how much the CapEx [capital expenditure] would be, what tax relief you바카라 사이트檙e getting and so on. Then once you바카라 사이트檝e made the decision to proceed with the project you then put your implementation hats on and you바카라 사이트檙e then starting to implement the project.바카라 사이트� More than 拢1 billion turnover바카라 사이트�바카라 사이트�聽

A significant amount of capital expenditure for plant and machinery, which the FYA is claimed on, goes towards equipment related to extraction, such as rigs, pumps and drills. This expenditure is more relevant to operating companies, which are responsible for the physical extraction of resources from the ground. In contrast, non-operating companies commission operating companies to carry out the extraction of oil and gas, and act as investors in land. Increased investment in the North Sea basin will result in increased investment in the equipment needed to extract oil and gas.바카라 사이트�饪挴聽

Plant and machinery required for each asset site is built to order and to a specification. The companies supplying equipment are therefore highly specialised to the oil and gas industry, and possibly to the specific asset, with highly tailored products that cannot be used in other sectors.바카라 사이트�聽

It바카라 사이트檚 a mixture of different equipment types, there바카라 사이트檚 a lot of standardised equipment, but there바카라 사이트檚 a lot of bespoke equipment when we do various projects bespoke with them and that has to be produced and manufactured for that particular need.바카라 사이트� More than 拢1 billion turnover바카라 사이트�바카라 사이트�聽

If you can get investments off the ground that flows through into jobs for operators, people working on platforms and it feeds all the way back through the supply chain as well. There바카라 사이트檚 a huge number of jobs in the UK dependent on a thriving UK oil and gas industry and if investment falls off or in periods of lower investment you do see that job base shrink.바카라 사이트� More than 拢1 billion turnover바카라 사이트�聽

Companies supplying the oil and gas sector are likely to be reliant on it for their income, given that they are so specialised. Continued investment is therefore likely to be important to the operation of these businesses.바카라 사이트�饪挴聽

Participants mentioned that suppliers often further subcontract supply work to other companies, given that their equipment consists of a range of different parts. This means that the economic benefits of continued investment in the North Sea, facilitated by the FYA, extend beyond the largest suppliers in the industry to smaller sub-contracted companies.바카라 사이트�聽

Due to the highly specialised nature of equipment supplied to oil and gas companies, participants mentioned that jobs within those supply chains are often technical and highly specific to the industry. It was seen as important to keep this talent in the UK so that those companies would continue to be able to support the industry effectively. One participant also mentioned that keeping highly skilled employees in the UK would also aid the transition towards low-carbon technologies, since many of the supply-side companies were also adapting for the Net-Zero transition.바카라 사이트�饪挴聽

Investment for maintenance purposes means that income for equipment suppliers extends beyond initial capital expenditure and provides a consistent flow of income over the course of an asset바카라 사이트檚 lifetime.바카라 사이트�바카라 사이트�바카라 사이트�聽

There바카라 사이트檚 a certain amount of care and maintenance we have to spend each year, just because they바카라 사이트檙e old platforms, so there바카라 사이트檚 an element of it that바카라 사이트檚 just keeping things business as usual.바카라 사이트� More than 拢1 billion turnover바카라 사이트�바카라 사이트�聽

8.2 Suppliers of services바카라 사이트�聽

In addition to the supply of equipment, companies we interviewed mentioned that they used service companies to assist their operation. As with suppliers of equipment, these service industries that have grown to support oil and gas indirectly benefit from the additional investment made because of the FYA.바카라 사이트�饪挴聽

The most common suppliers of services that were mentioned during interviews were:바카라 사이트�聽

Professional services firms바카라 사이트�聽

Various types of firms were used throughout the project lifecycle. For example, acquisitions of oil and gas assets required legal assistance, particularly in the case of arbitrating between companies in the case of joint ventures. Respondents using these types of firms mentioned their suppliers would not be oil and gas specific, but they would deal with an oil and gas specific practice within an organisation. This suggests that professional services firms are less reliant on the oil and gas industries than suppliers of equipment, though they still benefit from the industry and investment in it.바카라 사이트�饪挴聽

Accountancy and tax firms바카라 사이트�聽

Some companies (particularly smaller ones) outsource their accounting processes to tax agencies to free up their internal capacity. Similarly to the wider professional services findings, interviewees suggested that they would deal with a specific oil and gas practice in a general accountancy firm.바카라 사이트�饪挴聽

Service firms in this area also often provide services in the form of software, such as oil and gas specific accounting software that allows users to fill out UK specific tax requirements.바카라 사이트�聽

Geologists, academics and engineers바카라 사이트�聽

Investment and extraction in the industry involves consulting with experts due to the highly technical nature of the industry. For example, the process of deciding whether to invest in a particular asset might involve working with geological or engineering consultancies in order to understand the properties of the oil or gas, and whether it was likely to result in a return on investment. For example, one interviewee gave the example of needing to understand the viscosity of oil in order to accurately predict its value. Academics may also be consulted on technical questions related to the oil and gas itself. Unlike other providers of services, this group is much more industry-specific, and therefore much more dependent on the economic success of the oil and gas sector.바카라 사이트�饪挴聽

In some cases, the line between equipment and services suppliers is somewhat blurred, with some suppliers providing the service of finding suppliers for a particular oil and gas project. For example, the interviewee below shows how companies are often contracted to link their project up to the appropriate equipment suppliers:바카라 사이트�바카라 사이트�聽

I think it바카라 사이트檚 going to be fairly oil and gas specific but also it바카라 사이트檚 usually that we would end up contracting, say, [company] for example and then [company] would then subcontract to third party suppliers. We don바카라 사이트檛 usually have control or visibility to that extent, but as I said I think what we would바카라 사이트� provide the technical and financial requirements of what바카라 사이트檚 needed and at what price points and then it바카라 사이트檚 up to the service companies to then go out and find the suppliers for it.바카라 사이트� 拢100 to 999 million turnover聽

9. Proportionality and appropriateness바카라 사이트�聽

This section of the report covers the proportionality and appropriateness of the FYA for Plant and Machinery claimed by ring fence oil and gas companies:바카라 사이트�바카라 사이트�聽

• proportionality: the extent to which participants think the FYA is set at the correct level (should the FYA be more generous, or less)바카라 사이트�聽

• appropriateness: is the FYA the best way to encourage investment in the UK oil and gas industry, and how does it compare to reliefs in other parts of the world聽

9.1 Proportionality바카라 사이트�聽

There was little evidence that the investment stimulated by the FYA would have taken place anyway (바카라 사이트榙eadweight바카라 사이트�), with respondents suggesting that the FYA was encouraging investment that would otherwise not have taken place. This was partly due to participants suggesting that oil and gas companies were already paying high levels of tax and operating in a complex fiscal environment. Participants mentioned that companies in the oil and gas sector are expected to pay higher rates of corporation tax, a supplementary charge, and Petroleum Revenue Tax. The FYA therefore helps to offset this and benefits the project economics. Participants with longer-standing experience in the oil and gas industry drew a direct link between the introduction of the FYA and the introduction of the oil and gas supplementary charge ^{[footnote 2]}.

The FYA is one thing that arguably is better than everyone else. But that바카라 사이트檚 got to be set against the fact that we would happily swap to everyone else바카라 사이트檚 regime and pay their rates of tax. For example, we pay not only corporate income tax, corporation tax바카라 사이트� at a higher rate than normal companies. We have a supplementary charge on top of it, and we still have petroleum revenue tax consequences.바카라 사이트� More than 拢1 billion turnover바카라 사이트�바카라 사이트�聽

In addition to the tax regime, participants also referenced the contextual operating factors: the mature North Sea basin necessitates additional financial support in order to make projects viable against other international options and investments in oil and gas are generally risky, with return only expected after a 2 to 10 year period.바카라 사이트�饪挴聽

As a result, there was a high degree of confidence amongst participants that the FYA was leading to projects taking place that would not have done otherwise. Furthermore, there was also confidence that the FYA enabled certain assets to be explored and extracted from that would otherwise have been economically unviable. Participants therefore think that the relief has in effect unlocked value that would otherwise have been inaccessible. The design of the allowance, being 100% in the first year, was seen as highly beneficial to this.바카라 사이트�聽

I think cutting the FYA below 100% first year deductions would have a fairly big impact바카라 사이트� in terms of pushing some investments that we would otherwise have made into the non-viable camp.바카라 사이트� More than 拢1 billion turnover바카라 사이트�바카라 사이트�聽

When asked about the generosity of the relief, participants believed that a higher level of generosity would probably result in further investment, due to the decreased cost of capital. However, this was not spontaneously brought up by participants, suggesting that this was not something that was seen as required within the industry.바카라 사이트�聽

9.2 Ring fence trade requirement바카라 사이트�聽

Participants generally had no issue with the FYA being used only for ring fence trade. This is partly because they found the distinction between upstream and downstream trade simple to understand. In addition, the existence of other reliefs outside of the ring fence meant that the tax regime was perceived to be fair for companies in the sector. Many of the companies included in the sample were also upstream-only, meaning that the ring-fence meant little to them in practice.바카라 사이트�饪挴聽

9.3 Comparison to reliefs in other jurisdictions바카라 사이트�바카라 사이트�聽

Participants generally considered the FYA to be appropriate to the operating context in the UK, recognising that the current geological specifics of the UK meant that it required a different relief regime than other jurisdictions with deposits of oil and gas which had not yet been fully explored. Reliefs offered by other countries were therefore seen as difficult to compare directly with the UK, given that they operate using mechanisms relevant to the country바카라 사이트檚 oil and gas reserves. For example, some participants mentioned reliefs such as those in Norway, which heavily incentivise exploration as opposed to providing reductions in cost. In contrast, the government in the Netherlands provide relief on a unit-of-production basis, which aids companies in the decommissioning process.바카라 사이트�饪挴聽

Participants use economic modelling to effectively compare reliefs, by comparing the potential financial outcomes of projects including the reliefs which are available in each territory. This is to ensure they are making the most profitable and attractive investments for their business.바카라 사이트�聽

10. Conclusions바카라 사이트�聽

10.1 Implementation바카라 사이트�聽

Companies reported that the FYA for Plant and Machinery claimed by ring fence oil and gas companies (the FYA) is easy to claim, adding little additional burden. Claiming the FYA is done as part of the tax return process, meaning businesses which manage the tax return internally also manage the FYA claim process and those which outsource the tax return process also outsource this.바카라 사이트�聽

10.2 Outcomes바카라 사이트�聽

The research identified three different types of capital expenditure which the relief is used for: replacement, new investment in an existing asset and investment in a new asset.바카라 사이트�饪挴聽

Decisions about replacing existing plant and machinery are made locally, as these are central to continued operation. Decisions about additional investment in new or existing assets are made by senior management, which could be global and can often involve multiple partners of a joint venture. This type of decision-making is informed by economic modelling to identify the likely financial return of a particular investment. The FYA is used to inform these economic models for UK projects and is factored into the projected financial outcomes. These economic models are used to decide which projects will go ahead, in a highly competitive global environment. Participants in this research felt confident that the FYA contributes to projects going ahead which otherwise would not.바카라 사이트�聽

Participants felt by ensuring projects will go ahead, the FYA benefits the company, its suppliers and the wider UK oil and gas industry.바카라 사이트�聽

10.3 Proportionality바카라 사이트�聽

There was little evidence that businesses would have made the same level of investment without the FYA in place. Participants were clear that without the FYA, some projects were unlikely to be commissioned and that being able to claim 100% of the Capital Investment in the first year was beneficial to project economics. They felt that if the FYA was not in place, something similar would be required to support continued investment into the UK oil and gas industry.바카라 사이트�聽

10.4 Appropriateness바카라 사이트�聽

Participants reported that the reliefs and incentives which countries offer for investment in their oil and gas industry depends on their economic status and the age and nature of their oil and gas reserves. For this reason, they found it hard to compare the FYA with reliefs offered by other countries.바카라 사이트�聽

11. Our standards and accreditations바카라 사이트�聽

Ipsos바카라 사이트� standards and accreditations provide our clients with the peace of mind that they can always depend on us to deliver reliable, sustainable findings. Our focus on quality and continuous improvement means we have embedded a 바카라 사이트渞ight first time바카라 사이트� approach throughout our organisation

• ISO 20252: This is the international market research specific standard that supersedes BS 7911/MRQSA and incorporates IQCS (Interviewer Quality Control Scheme). It covers the five stages of a Market Research project. Ipsos was the first company in the world to gain this accreditation

• Market Research Society (MRS) Company Partnership: By being an MRS Company Partner, Ipsos endorses and supports the core MRS brand values of professionalism, research excellence and business effectiveness, and commits to comply with the MRS Code of Conduct throughout the organisation. We were the first company to sign up to the requirements and self-regulation of the MRS Code. More than 350 companies have followed our lead

• ISO 9001: This is the international general company standard with a focus on continual improvement through quality management systems. In 1994, we became one of the early adopters of the ISO 9001 business standard

• ISO 27001: This is the international standard for information security, designed to ensure the selection of adequate and proportionate security controls. Ipsos was the first research company in the UK to be awarded this in August 2008

• The UK General Data Protection Regulation (GDPR) and the UK Data Protection Act (DPA) 2018: Ipsos is required to comply with the UK GDPR and the UK DPA. It covers the processing of personal data and the protection of privacy

• HMG Cyber Essentials: This is a government-backed scheme and a key deliverable of the UK바카라 사이트檚 National Cyber Security Programme. Ipsos was assessment-validated for Cyber Essentials certification in 2016. Cyber Essentials defines a set of controls which, when properly implemented, provide organisations with basic protection from the most prevalent forms of threat coming from the internet

• Fair Data: Ipsos is signed up as a 바카라 사이트楩air Data바카라 사이트� company, agreeing to adhere to 10 core principles. The principles support and complement other standards such as ISOs, and the requirements of Data Protection legislation

For more information:바카라 사이트�聽

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About Ipsos Public Affairs바카라 사이트�聽

Ipsos Public Affairs works closely with national governments, local public services and the not-for-profit sector. Its c.200 research staff focus on public service and policy issues. Each has expertise in a particular part of the public sector, ensuring we have a detailed understanding of specific sectors and policy challenges. Combined with our methods and communications expertise, this helps ensure that our research makes a difference for decision makers and communities.聽

1. [Tax relief Statistics December 2021] Tax relief statistics - 바카라 사이트聽鈫�

2. An additional charge on profits of companies involved in exploration for and production of oil and gas in the UK and on the UK continental shelf聽聽鈫�