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Investment warning as Energy Profits Levy extended

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After confirmation that the Energy Profits Levy will be extended for a further year to 2029, Claire Angell of KPMG has warned that the move makes the UK a ‘more difficult place in which to invest’.

6th Mar 2024
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The extension of the Energy Profits Levy makes the UK a “more difficult place in which to invest”, according to a senior figure at KPMG, after Jeremy Hunt announced the measure at his Spring Budget.

The windfall tax was set to run until March 2028 but will now end a year later, with the move expected to raise £1.5bn.

The government will also include legislation in the Spring Finance Bill to “disapply the levy when prices return to normal”.

Claire Angell, partner and head of energy tax at KPMG in the UK, noted that the extension is the “latest in a series of changes to the oil and gas windfall tax since it was introduced in May 2022”.

This includes the 25% levy rising to 35% in January 2023.

More difficult place to invest

Angell believes that for an industry which “rightfully seeks fiscal stability given the long-term nature of their investments, this makes the UK a more challenging place in which to invest”.

“While the political pressure to balance the books in this Budget was clear, this may have unintended consequences and a potential cost to the taxpayer in the medium to long term,” she added.

“Postponing or shelving new development projects and the early cessation of production will reduce future tax revenues.”

She also noted that where decommissioning starts earlier than planned, the government’s liability of up to 75% of those costs “will be accelerated”.

“This also has a potential impact on jobs, for a workforce whose skills will be key to the energy transition.”

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