Decom North Sea members, Jumpstart lift the lid on minimising decommissioning costs and how R&D tax credits work in the oil and gas industry.
Minimising Decommissioning Costs
Since 2013, many of the world’s largest oil companies have cut back on their research spending, in an effort to save money in the face of plummeting crude oil prices - but in the face of global competition, these cuts are undoubtedly having a negative effect on progress.
As decommissioning in the North Sea continues, it’s predicted that tens of thousands of platforms, pipelines, blocks and wells will have been removed by the 2050s - and this will come at a cost. As the UK strives to become a global leader in the decommissioning of oil and gas, financial support will be necessary - and this is where R&D tax credits come in.
This form of relief can be claimed back, either as a reduction on your tax bill or as a cash payment - meaning companies could be reimbursed for their research efforts. Following HMRC’s introduction of Decommissioning Relief Deeds (DRD), if tax relief available for decommissioning costs is reduced in the future, the government will make the up the difference. This welcome support provides extra assurance for those affected by the costs associated with decommissioning in the North Sea and beyond, and will help to shape the future of the industry.
Year on year, as more businesses become aware of their eligibility, the number of R&D tax credit claims is steadily increasing. In a report published earlier this year, it was revealed that 14% more companies had claimed R&D tax credits in the year to March 2015, compared to the previous year. So, how does this apply to you?
R&D tax credits in the oil & gas industry
In the oil and gas industry, many businesses are working on researching and developing new technologies, but failing to claim relief. Ensuring you’re aware of the potential returns available in your sector is imperative at a time when the financial implications offer such a cause for concern. The risk to the surrounding environment is often flagged as an issue that needs to be addressed when it comes to decommissioning - so more time, money and resource will need to be poured into researching and improving existing strategies.
Many companies are unaware that they qualify for R&D tax credits because they’re under the impression that it only applies to specific sectors or research methods. This invaluable financial aid can provide a lifeline for those in the oil and gas industry, but is often overlooked by those operating in fields where their eligibility is not quite so obvious. If your accountant or tax adviser is able to offer specialist advice in R&D tax credits for the oil and gas industry, great. If not, avoid missing out on potential returns or over-claiming by seeking professional advice.
As decommissioning continues to be rolled out, now is the time to find out if you’re eligible for R&D tax relief.