After raking in substantial profits all over the world last year, Shell announced that they would be paying tax in the UK for the first time since 2017. In the final three months of the year, the energy company said it expected to lose about 2 billion dollars on profits in the UK and the European Union.
Energy companies have paid taxes to get a piece of the huge profits they have made from high gas and oil prices. At this time, Shell will not disclose the final amount of UK tax it will pay. It is understood that the number may be lower than anticipated at this point. After accounting for losses, investing in renewable energy, or decommissioning North Sea oil platforms, the amount of tax oil and gas companies pay in the UK can be reduced.
Shell disclosed a significant increase in profit last year, reaching 9.5 billion dollars across its global operations between July, 2022 and September, 2022. Shell claimed at the time that it was exempt from paying taxes in the UK because it had made substantial investments there and had not made a profit. However, the company confirmed on Friday that, for the first time since 2017, it does anticipate paying some tax in the UK.
In November, the government implemented a policy known as the Energy Profits Levy, also known as the windfall tax, that saw the tax on profits from the extraction of oil and gas in the UK rise from 25% to 35%. The division of the 2 billion dollars hit to Shell’s earnings in the final months of 2022 between the UK and the EU was not explained in detail.
After the COVID-19 lockdowns ended, oil and gas prices started to go up. However, when Russia invaded Ukraine, they went up a lot. In 2022, energy companies like Shell and BP made a lot of money.
The government was under pressure to act as households were being hit hard by skyrocketing energy costs, so it implemented a windfall tax on companies’ profits to help pay for a plan to cut down on gas and electricity costs. The North Sea oil and gas industry is taxed differently than other businesses. Profits are subject to corporation tax at a rate of 30% and a further 10%. In addition, they now have to pay the windfall tax, which raises their overall tax rate to 75%.
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