In addition to a new regime for onshore oil and gas projects, the Chancellor announced a number of measures to stimulate exploration for both onshore and offshore exploration. Those measures include:
- an extension of reinvestment relief where a company sells an asset used for exploration and appraisal activity and reinvests the proceeds in the UK and UK continental shelf;
- an extension of the scope of the Substantial Shareholding Exemption to treat a company as having held a substantial shareholding for the 12 months before the disposal where that subsidiary is using assets for exploration and appraisal that have been transferred from other group companies; and
- a commitment to review options to mitigate the effect of the profit transfer targeted anti-abuse rule on oil and gas exploration and appraisal and similar activity in other sectors.
Who will be affected?
All groups and companies with interests in the UK Continental Shelf and certain other sectors.
Further information is expected on 10 December 2013, with proposals likely to be effective from April 2014.
These further measures are a welcome development and reflect Government's continuing support exploration for oil & gas in the UK and on the UK Continental Shelf. Sustained exploration activity is vital if the full potential for the extraction of UKs indigenous hydrocarbon reserves is to be realised.
In particular, it is hoped that review of the effect of recent profit transfer targeted anti-avoidance rules could lead to removal of potentially significant barriers to managing downside risks associated with exploration activities.