• Is your oil & gas company being rewarded for solving technical problems?
Industry issue:

Is your oil & gas company being rewarded for solving technical problems?

30 October 2019

Oil & gas companies are constantly striving to solve technical problems to manage current oil and gas price fluctuations. Are you? If so, are you being rewarded for it?

Current geopolitical tensions have prevented companies to readily predict future prices. To mitigate the risk, oil & gas companies are undertaking a huge range of activities that qualify for the UK’s R&D tax relief. These include:

  • Modifying brownfield topsides and subsea facilities
  • Improving modelling techniques to enhance resolution and confidence in the economic value of reservoirs and unlock access to fossil fuels
  • Developing more efficient construction, installation, drilling, operational and maintenance techniques
  • Undertaking new crude or catalyst trials to reform existing refinery processes
  • Developing renewable energy technology to diversify from the dependence on fossil fuels

If your company is involved in any of the above, you may want to read on:

Two distinct schemes provide tax relief for research and development:

  • The Small or Medium-sized Enterprise (SME) Scheme allows companies to claim a 230% tax deduction for qualifying spend. Loss making companies can surrender this deduction, resulting in a tax payment equal to up to 33% of the qualifying R&D expenditure.
  • The Research and Development Expenditure Credits (RDEC) applies to large companies where claimants currently benefit from a credit equal to 9.7% of the qualifying R&D expenditure. Loss making companies can apply for a cash payment.

Some of the key features of the schemes that are worth considering, are:

  • Loss-making companies can receive a real cash benefit
  • Profit-making companies will benefit from a reduction in their tax liability
  • The IRF regime means that large upstream companies operating in the UK continental shelf can benefit up to 29.4% of the R&D expenditure
  • Design and engineering development activities may also qualify - activities don’t need to be ground-breaking or cutting edge!
  • SMEs that have yet to trade are still eligible for R&D tax rebate if they make an election

It’s not too late to make an R&D tax claim. A claim can be made within two years of the end of the relevant accounting period.

If you have any questions or are interested in understanding more about whether your company qualifies, please get in touch with us.