Not so fast: Osborne closes oil and gas tax loophole

By staff

George Osborne is legislating to block oil and gas companies from recovering up to £900 million in tax bills.

The chancellor announced the finance bill will prevent distribution companies from making new claims on costs dating back decades via a tax loophole.

Treasury officials were forced to move against oil and gas companies after they began claiming capital allowances for costs already covered by business customers.

"It is completely unacceptable that utility companies think they can claim for huge amounts of money, that business customers have already covered the cost for," Osborne said.

"By legislating today, we will prevent utility companies from making these claims, ensuring fairness for British taxpayers."

HM Revenue and Customs is expected to be "robust" in challenging claims already submitted to the Treasury.

The draft legislation is effective immediately, but the government could face legal difficulties in forcing the new rules on retrospective claims.

Oil and gas companies will be frustrated by the development, which prevents them from generating large windfall tax repayments and reductions.

This is not the first time the chancellor has moved against oil and gas companies. In 2011 his Budget included a £2 billion windfall tax on North Sea profits.