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ken_ichikawa

Tax Tax Tax!

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A better system would be to pay them to extract the gas with ownership of the gas remaining with the nation. Put it out to tender, whoever bids lowest wins the extraction contract but never owns the gas. Much simpler than special taxes.

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You do only pay tax on profits though don't you?

They are obviously making too much profit already...

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Edited by wise_eagle

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You do only pay tax on profits though don't you?

Yes. That's right.

Corporation tax on profits for oil/gas companies was 50%. It has now been increased to 62%. For a field that makes a post-tax profit of £100 million per year, it has the effect of reducing that profit to £76 million.

So, while it doesn't stop a field from being profitable, it may reduce cashflow to the point that the resources might be more efficiently deployed elsewhere.

It's pretty staggering how much oil and gas are taxed. I was surprised to find out that expenses incurred in exploring for oil and preparing a field aren't tax-deductible; they have to be paid out of post-tax income.

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I was surprised to find out that expenses incurred in exploring for oil and preparing a field aren't tax-deductible; they have to be paid out of post-tax income.

The tax system in the UK is pretty crazy anyway, it purposefully punishes risk taking. Research and development for instance can only be amortised or written off against your profits IF a product comes out the end of the process.

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The tax system in the UK is pretty crazy anyway, it purposefully punishes risk taking. Research and development for instance can only be amortised or written off against your profits IF a product comes out the end of the process.

Why bother with R&D when you can put your money in BTL :D

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The tax system in the UK is pretty crazy anyway, it purposefully punishes risk taking.

Golly, look how Sir Fred et al got punished for risking the whole bloomin' economy ...

It punishes work heavily, and takes more modest amounts from other things.

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You do only pay tax on profits though don't you?

Are they just taking the pee?

But profit isn't guaranteed! Gas exploration fails - Centrica loses. Gas exploration succeeds - the government win.

Why would Centrica bother?

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But profit isn't guaranteed! Gas exploration fails - Centrica loses. Gas exploration succeeds - the government win.

Why would Centrica bother?

Because other wise they'll have to get into BTL?

Isn't centrica the same as british gas?

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Centrica Upstream or whatever they are called, if they are talking about closing a one of their gas fields there or in the Irish sea, its because its no longer profitable and they are too tight fisted to upgrade their antiquated remote platforms.

All this talk about tax is bull, especially when you consider the price of crude and gas at the moment.

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The tax system in the UK is pretty crazy anyway, it purposefully punishes risk taking. Research and development for instance can only be amortised or written off against your profits IF a product comes out the end of the process.

My own pet hate is the plant & machinery allowances system.

Basically, if you spend a load of money on plant you can only write off a portion of it each year against taxable profit (20%). What this means is that £1m spent on running costs is entirely allowed against profit for the first year, but a business doing what is really needed and investing to be competitive only gets to write off 20% of the cost on a reducing balance basis.

I would only allow the same total deduction, I'd just let it all happen in year 1 (the year it is all spent anyway), same as if it was spent on materials or wages. It's not as if the profits of the machinery providing company are taxed on the same deferred basis!

It's a straightforward disincentive to invest, or an incentive to stay inefficient, if you like. Yet we need World Class manufacturing. Mad. And reducing Corp Tax while increasing this allowance is a double whammy disincentive.

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Yes. That's right.

Corporation tax on profits for oil/gas companies was 50%. It has now been increased to 62%. For a field that makes a post-tax profit of £100 million per year, it has the effect of reducing that profit to £76 million.

So, while it doesn't stop a field from being profitable, it may reduce cashflow to the point that the resources might be more efficiently deployed elsewhere.

It's pretty staggering how much oil and gas are taxed. I was surprised to find out that expenses incurred in exploring for oil and preparing a field aren't tax-deductible; they have to be paid out of post-tax income.

How is this true? Aren't these expenses part of Cost of Goods Sold/Operating Expenses OR Capital Expenses (that can be amortised/depreciated) - both of which are above the EBITDA line?

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Centrica Upstream or whatever they are called, if they are talking about closing a one of their gas fields there or in the Irish sea, its because its no longer profitable and they are too tight fisted to upgrade their antiquated remote platforms.

All this talk about tax is bull, especially when you consider the price of crude and gas at the moment.

I'm not normally in favour of higher taxes, being right of centre, but this is true IMHO. If it were not true then countries with punitive tax rates, such as Norway and Sweden, would not get any multinationals doing business there - BUT THEY DO STRANGELY ENOUGH!!!

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How is this true? Aren't these expenses part of Cost of Goods Sold/Operating Expenses OR Capital Expenses (that can be amortised/depreciated) - both of which are above the EBITDA line?

orry, depreciation/amortisation is obviously below the EBITDA line duh!

Which means that these expenses are capital expenses, right and not operating expenses?

Aren't companies generally happier to have expenses capitalised?

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I would only allow the same total deduction, I'd just let it all happen in year 1 (the year it is all spent anyway), same as if it was spent on materials or wages. It's not as if the profits of the machinery providing company are taxed on the same deferred basis!

Trouble with that, that opens the door wide to jokers who buy their stuff tax-free through the business, write it down over a year, sell it to themselves for £1. Nice wheeze.

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Trouble with that, that opens the door wide to jokers who buy their stuff tax-free through the business, write it down over a year, sell it to themselves for £1. Nice wheeze.

It should be possible to come up with a system that encourages real investment but makes fraud difficult.

How about allowing a 10% write-off per year for up to ten years? That would help Mr Bogbrush buy new machinery but wouldn't really assist him in buying a new Merc on the company tab.

Edited by the shaping machine

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It should be possible to come up with a system that encourages real investment but makes fraud difficult.

How about allowing a 10% write-off per year for up to ten years? That would help Mr Bogbrush buy new machinery but wouldn't really assist him in buying a new Merc on the company tab.

The whole system needs total reform really rather than tinkering with the allowances.

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How is this true? Aren't these expenses part of Cost of Goods Sold/Operating Expenses OR Capital Expenses (that can be amortised/depreciated) - both of which are above the EBITDA line?

It's a peculiar rule about oil/gas production. Essentially, income from production of oil from each field is 'ring-fenced' and cannot be offset by losses or expenses in activities that are not directly incurred in the production of oil/gas. Similarly, if an economically marginal field makes a loss, that loss cannot be deducted from the profit of a more profitable field.

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The whole system needs total reform really rather than tinkering with the allowances.

I'm sure that's true, but the post I was replying too seemed to suggest that the ability to write off capital investment against tax simply encouraged fraud. It may do currently, but the system could be designed to minimise that risk, assuming it is real.

For myself, I'm not convinced that a business should be required to pay taxes directly on its profits. Taxing anything discourages it, and the state should not be discouraging businesses from being successful. Ideally taxation should be applied at the point the money passes to a real person (as wages, dividends, VAT, etc).

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I'm sure that's true, but the post I was replying too seemed to suggest that the ability to write off capital investment against tax simply encouraged fraud. It may do currently, but the system could be designed to minimise that risk, assuming it is real.

For myself, I'm not convinced that a business should be required to pay taxes directly on its profits. Taxing anything discourages it, and the state should not be discouraging businesses from being successful. Ideally taxation should be applied at the point the money passes to a real person (as wages, dividends, VAT, etc).

Yes, and what the government chooses to deliberately to ignore is that, like never before, the technology also exists to make it simple.

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  • 284 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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