LONDON, May 13 (Reuters) – A planned change in the way Britain taxes North Sea drillers exposes the loophole in a system that allowed an industry with annual revenues of 2 billion pounds to pay almost no corporation tax for two decades, prompting accusations that the UK tax authority is falling down on the job.
The change, announced by Finance Minister George Osborne in March, caps the amount a UK company can deduct from profit for leasing drilling rigs from an overseas unit in the same group.
The rig-leasing units are typically based in countries where their income is taxed lightly or not at all.
A Reuters review of company accounts, shipping registers and other company statements, shows that such inter-company transactions - known as transfer pricing - have enabled drilling groups in the North Sea to operate almost tax free for 20 years or more, perfectly legally, and with the agreement of Britain's tax authority, Her Majesty's Revenue & Customs (HMRC).
Companies that have benefited from the current rules include Ensco Plc, Rowan Companies Plc and Transocean Ltd, which collectively accounted for over 60 percent of the UK market in 2012.
There is no suggestion of wrongdoing by any of these companies, which declined to comment.
"HMRC has always been fully aware that companies use this approach," said Mike Tholen, Economics Director at North Sea industry body, Oil and Gas UK. "The arrangements were appropriate fiscally for the business these companies have."
View Full Article
Copyright 2017 Thomson Reuters. Click for Restrictions.
WHAT DO YOU THINK?
Click on the button below to add a comment.
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
Most Popular Articles
From the Career Center
Jobs that may interest you