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Fiscal Comparison/Exploration Attractiveness
4.7 UK fiscal terms
Summary of current fiscal terms
All upstream operations in the UK are governed by concessions. Government take on new field developments currently
comprises of corporation tax (CT) and a supplementary charge (SCT). CT is levied at a rate of 30% and SCT at 32%, to
give an effective tax rate of 62%.
Fields with development approval prior to 16 March 1993 are liable to Petroleum Revenue Tax (PRT) at a rate of 50%, in
addition to CT and SCT. The effective tax rate on fields subject to PRT, as well as CT and SCT, is 81%.
Flowchart of UK Fiscal System for new fields
4.7.1 UK current fiscal terms
Licence Terms
Production licences cover both exploration and production in the UK. Licences are most commonly awarded through
competitive licensing rounds, which usually occur every year. There is also a process for out of round licence
applications, which can be used in exceptional circumstances. Seaward Exploration Licences can also be awarded, but
do not cover intrusive exploration such as drilling. The Exploration licence is cheaper than the Production licence with a
flat rate of £2000 per year.
Production licences cover three terms, with the duration of each term dependent on the type of licence. Licence holders
are required to pay an application fee in addition to a licence fee, which is calculated for each square kilometre included
in the licence area, for the initial term, and then subsequent payment for each year in the further term.
There are five types of Production Licence awarded in the UK:
Seaward Production Licence (Traditional)
This was the first type of licence awarded in the UK, and the most commonly issued since the start of the UK licensing
process. The licence covers initial and second terms of four years and a third term of 18 years. At the end of the first
term, 50% of the acreage covered by the licence must be relinquished.
Seaward Production Licence (Promote)
In February 2003, the UK Department of Trade and Industry (now Department of Energy and Climate Change - DECC)
introduced a new type of Seaward Production Licence. The Seaward Promote Licence is awarded in the same way as
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