Introduction
Petroleum Revenue Tax (PRT) is a tax levied on companies engaged in oil and gas exploration and production activities in the UK Continental Shelf. In this article, we will discuss the Petroleum Revenue Tax, its importance, and how it is calculated.
Understanding Petroleum Revenue Tax
- Petroleum Revenue Tax (PRT) is a tax on profits generated from oil and gas production activities in the UK Continental Shelf.
- The tax is paid by companies engaged in exploration and production activities, rather than individuals.
- PRT was introduced in 1975 to ensure that the UK government receives a fair share of the profits generated from the country's natural resources.
Importance of Petroleum Revenue Tax
- Petroleum Revenue Tax is an important source of revenue for the UK government, raising approximately £200 million per year.
- The tax helps to ensure that the UK government receives a fair share of the profits generated from oil and gas exploration and production activities.
- The revenue raised from PRT is used to fund public services such as healthcare, education, and social welfare.
How Petroleum Revenue Tax is Calculated
- Petroleum Revenue Tax is calculated based on the profits generated from oil and gas exploration and production activities in the UK Continental Shelf.
- The tax rate is currently set at 35% for profits generated from oil and gas fields that were granted development consent before 16 March 1993.
- For fields that were granted development consent after 16 March 1993, the tax rate is set at 0% until a company's profits exceed a certain level, after which the tax rate is gradually increased.
Examples of Petroleum Revenue Tax
- Example 1: A company generates £1 million in profits from oil and gas production activities in the UK Continental Shelf from fields that were granted development consent before 16 March 1993. The company is required to pay £350,000 in PRT.
- Example 2: A company generates £1 million in profits from oil and gas production activities in the UK Continental Shelf from fields that were granted development consent after 16 March 1993. The company is not required to pay any PRT until its profits exceed £2 million, after which the tax rate gradually increases.
Conclusion
Petroleum Revenue Tax is a tax on profits generated from oil and gas exploration and production activities in the UK Continental Shelf, designed to ensure that the UK government receives a fair share of the profits generated from the country's natural resources. The tax rate is currently set at 35% for profits generated from fields granted development consent before 16 March 1993, and gradually increases for fields granted development consent after that date. By understanding how PRT is calculated, companies engaged in oil and gas exploration and production activities can make more informed decisions about their operations and budget accordingly.