What is Petroleum Revenue Tax?
Petroleum Revenue Tax (PRT) is a tax levied on the profits generated from the sale of oil and gas extracted within the UK or from the continental shelf of the UK. Established in 1975, the primary purpose of PRT was to ensure that the UK government could obtain a substantial share of the profits derived from oil operations, particularly those in the North Sea.
Although PRT applies to profits from oil and gas extraction, it has undergone several changes over the years. Notably, oilfields receiving development consent on or after March 16, 1993, were exempt from PRT, and more recent regulations have further adjusted the taxation structure for the oil and gas sector.
Key Points:
- Initially introduced to capture profit from North Sea oil operations.
- No longer applies to oilfields with development consent post-March 16, 1993.
- Current PRT rate is 35%.
- Profits from oil extraction are also subject to an additional supplementary corporation tax charge of 10%.
Examples of Petroleum Revenue Tax Application
-
Established Oilfield: A company operating an oilfield sanctioned before March 16, 1993, would still be subject to PRT. The profits from oil extraction in this field would be taxed at 35%, along with an additional 10% supplementary corporation tax.
-
Modern Oilfield: An oilfield developed with consent after March 16, 1993, would not have to pay PRT. However, the profits from this field would still incur other taxes, such as the supplementary corporation tax of 10%.
Frequently Asked Questions
1. Why was Petroleum Revenue Tax introduced?
Petroleum Revenue Tax was introduced to allow the UK government to capture a substantial portion of the profits generated from oil and gas extraction, particularly in the North Sea. This was part of a broader strategy to secure economic benefits from the country’s natural resources.
2. Does PRT apply to new oilfields?
No, PRT does not apply to oilfields that received development consent on or after March 16, 1993.
3. What is the current tax rate for PRT?
The current Petroleum Revenue Tax rate is 35%.
4. What other taxes apply to profits from oil extraction?
Apart from PRT, profits from oil extraction are subject to a supplementary corporation tax charge of 10%.
5. Has PRT been completely abolished?
No, PRT is not entirely abolished. It still applies to oilfields that were given development consent before March 16, 1993.
Related Terms
- Supplementary Corporation Tax: An additional tax charged on the profits from oil and gas extraction activities, currently set at 10%.
- UK Continental Shelf: The area of seabed around the UK where the country claims exclusive rights to exploit resources.
- Oilfield Development Consent: Regulatory approval needed before initiating development of an oilfield.
Online References
- HM Revenue & Customs - Oil taxation manual
- UK Government - Functional overview of oil taxation
- UK Oil and Gas Authority - Regulatory framework
Suggested Books for Further Studies
- “The Taxation of Petroleum and Minerals: Principles, Problems and Practice” by Philip Daniel, Michael Keen, and Charles McPherson - This book offers a comprehensive look at the principles and practices of taxing petroleum and mineral resources.
- “Oil and Gas Taxation: A Practical Guide” by Patrick A. Hennessee - A detailed guide on the taxation issues specific to the oil and gas industry.
- “British Petroleum and Global Oil 1950-1975: The Challenge of Nationalism” by James Bamberg - Explores the history and impact of oil taxation on British Petroleum and global oil markets.
Accounting Basics: “Petroleum Revenue Tax (PRT)” Fundamentals Quiz
Thank you for exploring our detailed overview of Petroleum Revenue Tax (PRT) and participating in our challenging quiz questions. Continue enhancing your financial and taxation expertise!
