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Oil & Gas: Transferable Tax History and decommissioning relief for PRT

Transferable Tax History and decommissioning relief

Finance Bill 2018-19 includes two new measures which amend decommissioning tax relief for corporation tax and Petroleum Revenue Tax purposes.

Claire Angell

Partner and UK Head of Oil & Gas

KPMG in the UK


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Summary of proposal

Transferable Tax History

After consultation with industry, the Government has confirmed that Transferable Tax History (TTH) will allow companies selling North Sea oil fields to transfer tax payment history to the buyer. The buyer will then be able to set the costs of decommissioning the fields at the end of their lives against the TTH. 

TTH comprises taxable profits subject to ring fence corporation tax and the associated adjusted ring fence profits subject to the supplementary charge to tax.  The amount of TTH that may be transferred is to be limited to double the estimated decommissioning cost of the asset, once certain adjustments have been made to that estimate.

The buyer can access the TTH to the extent that the expenditure on the decommissioning of the TTH asset has exceeded the profits generated from the TTH asset in the hands of the buyer.

In order to demonstrate that expenditure on decommissioning has exceeded the post-acquisition profits, the buyer is required to track the ring fence taxable profits and submit a record to HMRC on an annual basis.  A nominated individual must also certify to HMRC that the company has suitable arrangements and taken all reasonable steps to track appropriately the profits attributable to the TTH asset.

Buyers and sellers of asset that are associated with each other are only eligible to make a TTH election in certain circumstances:

  • The corporate restructuring condition: where another TTH election has been made on the same asset with a third party in the period up to 90 days before or 90 days after the election between the associated parties; or
  • The hive down condition: where two associated companies cease to be associated with each other within 90 days following the TTH election.

Petroleum Revenue Tax on retention of decommissioning liabilities

For transfers of fields receiving approval from the Oil and Gas Authority on or after 1 November 2018, decommissioning expenditure incurred by the previous owner (whether the responsibility for decommissioning has been retained by the old owner or passed to the new owner) may be deemed to be incurred by the new owner.  

The new owner can take relief for the expenditure incurred by the previous owner against its Petroleum Revenue Tax (PRT) profits and, where possible, against those of previous owners.

Our view

The easing of the rules around PRT relief for decommissioning and the introduction of TTH represent a positive step in facilitating transactions in late life assets and encouraging Maximum Economic Return. TTH provides an innovative solution to the perceived tax barriers which were considered to be preventing investment in the UK oil sector.

The legislation inevitably introduces a number of new compliance requirements, in particular in the calculation of the cap on the TTH amount and the requirement to track and report profits on an asset by asset basis.

Further consultation is expected over the summer to address the areas of potential uncertainty with the aim of ensuring that taxpayers can have confidence as to the new regime’s application.


A further period of consultation will take place over the course of the summer before the legislation is finalised as part of Finance Act 2018-19. 

TTH will be effective for transfers of oil fields which receive Oil and Gas Authority approval on or after 1 November 2018.


For further information please contact: 

Claire Angell, Partner and Head of Energy Tax at KPMG in the UK 

Anthony Massey, Director Tax, Energy & Natural Resources at KPMG in the UK 

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