The Chancellor’s updates – 26th May 2022
The Chancellor of the Exchequer delivered a Cost of Living Support package to Parliament on 26 May 2022. The package includes a range of features and benefits that will be rolled out throughout the next few months…
Energy Profits Levy
On 26 May 2022 the Chancellor announced a new tax on the profits of oil and gas companies operating in the UK and the UK Continental Shelf.
It will increase the headline rate of tax on those profits from 40% to 65%. The new levy will have built in a generous allowance which will reward those companies who invest in oil and gas production.
The Energy Profits Levy will apply to profits arising on or after 26 May 2022. Companies who have an accounting period that straddles that date will be required to apportion their profits. It is temporary and will be phased out when oil and gas prices return to historically more normal levels. The legislation will also include a sunset clause, which will remove the tax after 31 December 2025.
How the tax will operate
The Energy Profits Levy will be charged at 25%. The tax base will be computed in a similar manner to the existing taxes which apply to oil and gas companies: Ring Fence Corporation Tax and Supplementary Charge.
The levy will apply to a company’s ‘ring fence profits’, computed with a number of adjustments, and will be charged as if it were an amount of corporation tax.
The adjustments are:
- Finance costs are left out of account.
- Decommissioning costs are left out of account.
- An investment incentive. An ‘allowance’ will be generated on investment expenditure (capital expenditure and some operating and leasing expenditure) at 80% which can immediately be used to reduce profits subject to the levy.
- Loss relief will be available within the Energy Profits Levy, but there will be no cross over to any other ring fence taxes.
- RFCT losses cannot be used to reduce profits subject to the Energy Profits Levy.
Cost of living support
Millions of households across the UK are struggling to make their incomes stretch to cover the rising cost of living. That is why the government is providing over £15 billion in further support, targeted particularly on those with the greatest need.
Energy Bills Support Scheme doubled to a one-off £400:
- Households will get £400 of support with their energy bills through an expansion of the Energy Bills Support Scheme.
- As well as doubling the £200 of support announced earlier this year, the full £400 payment will now be made as a grant, which will not be recovered through higher bills in future years.
£650 one-off Cost of Living Payment for those on means tested benefits:
- More than 8 million households on means tested benefits will receive a payment of £650 this year, made in two instalments. This includes all households receiving the following benefits:
- Universal Credit
- Income-based Jobseekers Allowance
- Income-related Employment and Support Allowance
- Income Support
- Working Tax Credit
- Child Tax Credit
- Pension Credit
One-off £300 Pensioner Cost of Living Payment
- Pensioners are disproportionately impacted by higher energy costs, and many low-income pensioner households do not claim the means tested benefits they are entitled to.
- So pensioner households will receive an extra £300 this year to help them cover the rising cost of energy this winter.
- This additional one-off payment will go to the over 8 million pensioner households across the UK who receive the Winter Fuel Payment and will be paid on top of any other one-off support a pensioner household is entitled to, for example where they are on pension credit or receive disability benefits. Eligible households currently receive between £200 – £300, so the payment will represent at least double the support for this winter.
£150 Disability Cost of Living Payment
- Around six million people across the UK who receive the following disability benefits will receive a one-off payment of £150 in September:
- Disability Living Allowance
- Personal Independence Payment
- Attendance Allowance
- Scottish Disability Benefits
- Armed Forces Independence Payment
- Constant Attendance Allowance
- War Pension Mobility Supplement
£500m increase and extension of Household Support Fund
- To support people who need additional help, the Government is providing an extra £500 million of local support, via the Household Support Fund, which will be extended from this October to March 2023.
- The Household Support Fund helps those in most need with payments towards the rising cost of food, energy, and water bills.
- The government will issue additional guidance to Local Authorities to ensure support is targeted towards those most in need of support, including those not eligible for the Cost of Living Payments set out on 26 May 2022
Wondering how you can benefit from this extra support? Book in a call with Lucy below, at a time that suits you.