UK Government warned of risks from extended windfall tax on energy companies

The UK government faces warnings over its proposal to increase and extend the windfall tax on energy companies, which could threaten thousands of jobs and billions in investments. Offshore Energies UK (OEUK), supported by more than 40 organisations, expressed concerns in an open letter to Sarah Jones, UK Minister of State for Industry and Decarbonisation, regarding the recent approval of a 3% increase in the Energy Profits Levy (EPL), raising the rate to 78% and extending it until 2030.

The letter highlighted the elimination of the investment allowance and the reduction in capital allowances, arguing that these changes could force companies to scale back or delay investment plans, impacting the entire supply chain, jobs, and communities reliant on the energy sector. The letter also pointed out that oil and gas profits often fund renewable energy projects, which could be jeopardised by these tax measures.

Despite these concerns, the UK Treasury maintains that the windfall tax increase is part of its strategy to generate thousands of new jobs in future industries and to ensure that North Sea oil and gas producers contribute fairly to the energy transition. The government plans to raise windfall taxes, extend them for six years, and remove tax benefits for additional investment, including the main 29% investment allowance for qualifying expenditures from November 2024.

While UK Chancellor Rachel Reeves has indicated that some taxes will be raised in the autumn Budget, the Labour Party has assured that there will be no tax increases for “working people,” according to the BBC.