Oil and gas: taxation

Taxation of exploration for, and production of, oil and gas in the UK and on the UK Continental Shelf

This guidance was withdrawn on

The Oil & Gas Authority launched a new website on 3 October 2016 to reflect its new status as a government company.

This formalises the transfer of the Secretary of State’s regulatory powers in respect of oil and gas to the OGA, and grants it new powers. This website will no longer be updated. Visitors should refer to


The tax regime which applies to exploration for, and production of, oil and gas in the UK and on the UK Continental Shelf (UKCS) currently comprises the following three elements, described briefly in turn below:

  • Ring Fence Corporation Tax
  • Supplementary Charge
  • Petroleum Revenue Tax

More detail than given below can be found in the relevant sections of the Oil Taxation Manual

Ring Fence Corporation Tax (RFCT)

This is calculated in the same way as the standard corporation tax applicable to all companies but with the addition of a “ring fence” and the availability of 100% first year allowances for virtually all capital expenditure. The ring fence prevents taxable profits from oil and gas extraction in the UK and UKCS being reduced by losses from other activities or by excessive interest payments. The current main rate of tax on ring fence profits, which is set separately from the rate of mainstream corporation tax, is 30%

Supplementary Charge (SC)

This is an additional charge on a company’s ring fence profits (but with no deduction for finance costs). The current rate is 10%. The charge to supplementary charge may be reduced to zero on a slice of production income by the investment allowance, cluster area allowance or onshore allowance

Petroleum Revenue Tax (PRT)

This was a field-based tax charged on profits arising from oil and gas production from individual oil fields which were given development consent before 16 March 1993. The rate of PRT has been permanently set to 0% but it has not been abolished so losses (for example incurred as a result of decommissioning PRT-liable fields) can be carried back against past PRT payments. PRT was deductible as an expense in computing profits chargeable to RFCT and SC; refunds of PRT are chargeable to RFCT and SC

Marginal tax rate

The marginal tax rate is 40%.

Ring Fence Expenditure Supplement

The RFES assists companies that do not yet have sufficient taxable income for ring fence corporation tax purposes against which fully to set their exploration, appraisal and development costs. The RFES currently increases the value of losses carried forward from one accounting period to the next by a compound 10% a year for a maximum of 10 years, not necessarily consecutively.

Former elements of the regime

Brief details of former elements of the regime are given in the footnotes to the table of Government Revenues from UK Oil and Gas Production at Government revenues from UK oil and gas production.

Further information on upstream taxation

This page is maintained by the Oil and Gas Authority (OGA) and gives only a high level overview of the UK’s upstream fiscal regime. More detailed information on the regime is available from HM Revenue & Customs.

The OGA contact for further information is:

Mike Earp
4th Floor, 21 Bloomsbury Street


Tel: 0300 067 1604 / 07785 692644

Updates to this page

Published 30 December 2012
Last updated 4 July 2016 + show all updates
  1. Budget 2016 update

  2. Oil and Gas: Restructure and update content of taxation webpage

  3. Oil and gas: Taxation - Investment Allowance Materially Complete Project - (added)

  4. Oil and gas: Taxation - (updated)

  5. Oil and Gas: Update of Brown Field Allowances Guide

  6. Oil and gas: Taxation - (updated)

  7. Oil and gas: Brown Field Allowances: guidance - (updated)

  8. Oil and gas: Government revenues from UK oil and gas production - updated

  9. Government revenues from UK oil and gas production - updated

  10. First published.

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