A permanent Oil and Gas Revenue Levy (OGRL) on certain ‘exceptional’ oil and gas revenues arising from ring fence trades on the UK Continental Shelf is to be introduced, to sit alongside the existing ring fence corporation tax and supplementary charge. It will replace the Energy Profits Levy (EPL).
The Government announced at Autumn Budget 2024 its intention to develop a permanent successor to the EPL. At that point it was called the Oil and Gas Price Mechanism. Following a period of consultation, draft legislation has been published.
The key features are as follows:
- Exceptional revenues are calculated on a monthly basis by reference to disposals of oil and gas (including non‑arm’s‑length disposals brought to market value) plus hedging adjustments, with only amounts above specified reference prices brought within charge;
- Those reference prices are currently set at $90 per barrel of oil and £0.90 per therm of gas and will thereafter be indexed annually in line with CPI;
- The levy is charged at 35 percent on exceptional revenues, administered broadly as if it were corporation tax but is expressly non‑deductible;
- OGRL liabilities will be settled as part of quarterly instalment payments if applicable; and
- Detailed rules govern the calculation aiming to ensure consistency and fair measurement of revenues.
The new levy is designed to replace, on a permanent basis, the temporary EPL introduced in 2022, with commencement either from 31 March 2030 when the EPL ends, or an earlier date if brought forward under the Energy Security Investment Mechanism.
