Energy Profits Levy: Decommissioning Relief Deeds
Published 26 November 2025
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Who is likely to be affected
Oil and gas companies that operate in the UK or on the UK Continental Shelf.
General description of the measure
Decommissioning Relief Deeds (DRDs) are contracts entered into between HM Treasury and oil and gas companies. They define and, in effect, guarantee a minimum level of tax relief that an oil and gas company will receive in relation to its decommissioning expenditure. Companies can claim a payment under the DRD if the amount of tax relief they actually receive is less than the defined minimum level.
The Energy Profits Levy (EPL) was introduced in 2022 to tax the extraordinary profits of oil and gas companies following record high oil and gas prices. The calculation of profits subject to the EPL does not allow a deduction for decommissioning expenditure.
This measure confirms that no payment can be made under a DRD in relation to the unavailability of tax relief for decommissioning expenditure in the EPL.
Policy objective
When the EPL was introduced, it was always intended that it would not be a tax covered by the DRDs, and that no payments should arise under a DRD because of the unavailability of tax relief for decommissioning expenditure in EPL.
This measure confirms the government’s longstanding policy by providing explicitly that no payments can be made under a DRD in relation to the unavailability of tax relief for decommissioning expenditure in EPL. The government will also ensure that no payments can be made under a DRD in relation to the EPLs successor regime when it comes into force.
Background to the measure
Legislation has provided the opportunity for HM Treasury and oil and gas companies to enter into DRDs since 2013. These contracts operate to give companies more certainty on the minimum level of tax relief available for decommissioning expenditure based on the tax regime as it stood in 2013. This enabled decommissioning security arrangements to be agreed on a net of tax basis, freeing up cash for additional investment.
The introduction of EPL, including the exclusion of tax relief for decommissioning expenditure, did not interfere with this.
Detailed proposal
Operative date
This measure will have effect for decommissioning expenditure incurred on or after 26 November 2025.
Current law
Current law is included in section 80 Finance Act 2013, which provides the framework for the DRDs to be made.
Proposed revisions
Section 80 Finance Act 2013 will be amended to insert a new subsection which confirms that no payment under a DRD can arise in relation to the EPL for decommissioning expenditure incurred on or after 26 November 2025.
Summary of impacts
Exchequer impact (£ million)
| 2025 to 2026 | 2026 to 2027 | 2027 to 2028 | 2028 to 2029 | 2029 to 2030 | 2030 to 2031 |
|---|---|---|---|---|---|
| Nil | Nil | Nil | Nil | Nil | Nil |
This measure is not expected to have an Exchequer impact.
Macroeconomic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
There is no impact on individuals as this measure only affects businesses.
Equalities impacts
This measure only affects businesses therefore it is not anticipated that there will be impacts for those in groups sharing protected characteristics.
Administrative impact on business including civil society organisations
There are expected to be no impacts for the 200 companies operating in the UK or on the UK Continental Shelf as this is a technical amendment to ensure that the policy works as originally intended.
Customer experience is expected to remain the same following this change as it does not alter how businesses would interact with HMRC.
This measure is not expected to impact on civil society organisations.
Operational impact (£ million) (HMRC or other)
This measure is not expected to have any operational impact on HMRC or other government department.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be monitored and assessed alongside other measures in the government’s package for oil and gas tax changes.
Further advice
If you have any questions about this change, contact the oil and gas policy team at oilandgaspolicy@hmrc.gov.uk.