The Chancellor hopes reforms to taxation of overseas activities will bring in ‘hundreds of millions of pounds’.
Campaigners have cheered the Chancellor’s move to take aim at oil and gas profits with plans to close a tax loophole on overseas activities and raise hundreds of millions of pounds.
In a speech outlining cost-of-living support measures for households and businesses, Rachel Reeves said she would stop firms – including oil and gas giants such as BP and Shell – from reducing their tax liabilities by using corporate structures involving foreign branches.
She said some oil and gas groups that operate overseas through foreign branches “have structured their tax affairs in a way which ensures they pay little or no corporation tax on their UK energy trading profits”.
“Today we are putting an end to that practice,” she announced.
She added: “We expect these reforms to raise hundreds of millions of pounds a year and fund the package of measures set out today.”
Greenpeace welcomed the move to put “cash-strapped households over polluting profiteers”.
It comes after results from BP and Shell revealed massive profit hauls thanks to bumper results in their energy trading businesses because of soaring oil prices caused by the Iran war.
Shell reported underlying earnings of 6.92 billion US dollars (£5.09 billion) for the first quarter – more than double the result in the previous three months and 24% higher on a year ago.
It said the higher cost of crude had boosted its oil trading business, with the wider chemicals and products division seeing underlying earnings more than quadruple to 1.93 billion dollars (£1.41 billion).
BP also reported far better than expected results, with first quarter profits more than doubling to 3.2 billion US dollars (£2.35 billion) as its traders were able to capitalise on highly volatile oil prices.
Rudy Schulkind, political campaigner at Greenpeace UK, said: “It is already indefensible that companies like Shell are reaping eyewatering profits off the back of the energy crisis while millions face soaring bills and growing climate chaos.
“So it’s hugely encouraging that the Chancellor is siding with cash-strapped households over polluting profiteers.
“But the detail will matter, and we will be watching closely to ensure these commitments are delivered in full.”
BP and Shell did not immediately respond to requests for comment, while Offshore Energies UK (OEUK) – the UK’s leading energy body – said it was “reviewing what’s been proposed”.
The UK already imposes a windfall tax on the oil and gas sector of 38% when prices exceed thresholds set by the Government.
When combined with permanent corporate taxes, this brings the total headline tax rate on upstream oil and gas profits to 78%.
