Far from taxing Shell, Britain actually paid the oil giant £85mn

© Toby Melville
Britain was the only country in the world to give money to oil giant Shell last year, when UK taxpayers handed the firm an £85 million rebate.

The government handed over the cash because the company reclaimed the costs of decommissioning against the tax it had paid in previous years.

Chancellor George Osborne has made changes to tax laws for companies operating in the North Sea oil and gas field, and Shell has benefited enormously from the Conservative government’s fossil fuel incentives.

Earlier this year, the Sunday Times reported Shell paid no corporation tax in 2014, despite making a global profit of £19.87 billion (US$28.5 billion).

In 2015, the chancellor cut the petroleum revenue tax from 50 to 35 percent. That was just the start.

In his 2016 budget, he slashed the tax from 35 to 0 percent, a change which is expected to cost the government £1 billion over the next five years.

Shell insists its massive tax rebate is not related to these changes and dismisses the idea it benefits from a favorable taxation regime.

I certainly wouldn’t say the UK has generous tax arrangements. It’s just the accounting situation we find ourselves in,” a spokesperson told Carbon Brief.

A Treasury spokesperson said the rebate relates to rules which allow oil companies to write off virtually all capital expenditure.

The measures were brought in to “incentivize investment” in the oil industry, which is currently enduring a period of low global oil prices.

The fall in oil prices has had a significantly adverse impact on tax receipts. This is because many companies are making losses in the current low oil price environment,” the spokesperson told Carbon Brief.

Any such losses can be carried back and offset against an oil company’s taxable profits in earlier years.”

According to the Extractive Industries Transparency Initiative (EITI), oil and gas firms pocketed £476 million in 2014. Overall the sector paid the chancellor £3 billion.

Forecasters predict fossil fuel companies will cost the taxpayer £4.8 billion over five years, Carbon Brief reports.

Out of the 24 countries Shell reported on, Britain was the only net contributor to the firm.