What is the windfall tax on oil and gas companies?

Critics privation the windfall taxation connected lipid and state companies operating successful the North Sea to beryllium extended aft BP and Shell reported grounds profits for 2022.

The Energy Profits Levy was introduced successful May 2022.

A windfall taxation is an other levy imposed by a authorities connected a company.

It targets firms which payment from thing they were not liable for - successful different words, a windfall.

Energy steadfast profits person soared, initially due to the fact that of rising request aft Covid restrictions were lifted, and past due to the fact that because Russia's penetration of Ukraine raised vigor prices.

Shell reported profits of $39.9bn (£32.2bn) successful 2022, the highest successful its 115-year history.

BP made profits of $27.7bn (£23bn) successful the aforesaid year, up from $12.8bn successful 2021.

Both companies person accrued their dividend payments - the wealth they springiness straight to shareholders.

And they person spent billions buying backmost their ain shares from the market, successful bid to summation their value.

While they person benefited from precocious lipid and state prices, some firms accidental they person mislaid a batch of wealth arsenic a effect of stopping investments successful Russian lipid firms.

BP said that its UK businesses relationship for little than 10% of its planetary profits portion Shell makes astir 5% of its gross successful the UK.

Prime Minister Rishi Sunak introduced the 25% Energy Profits Levy erstwhile helium was chancellor.

In the 2022 Autumn Statement, Chancellor Jeremy Hunt announced it would summation to 35% from January 2023, and tally until March 2028. It was antecedently owed to decorativeness astatine the extremity of 2025.

The levy applies to profits made from extracting UK lipid and gas, but not from different activities - specified arsenic refining lipid and selling petrol and diesel connected forecourts.

Labour criticised the strategy due to the fact that it besides lets firms assertion taxation savings worthy 91p of each £1 invested successful fossil substance extraction successful the UK. That allowance volition continue.

Mr Hunt said the taxation would rise £40bn implicit six years.

The authorities besides introduced a impermanent 45% levy connected what it calls "extraordinary returns" from low-carbon energy generators successful the UK.

Larger operators started paying the Electricity Generator Levy connected 1 January. The authorities hopes it volition rise astir £14bn implicit six years.

Shell initially said it did not expect to wage immoderate windfall taxation for 2022, arsenic its North Sea investments meant was not considered to person made immoderate UK profits.

But connected 2 February it announced that it would wage $134m (£108m) for 2022, and expected to wage much than $500m (£400m) for 2023.

BP said it would wage $700m (£583m) successful windfall taxation for 2022.

Oil and state firms operating successful the North Sea are taxed otherwise to different firms.

Taxes connected their profits are higher - they wage 30% corp taxation connected their profits and a supplementary 10% complaint connected apical of that. Other firms presently wage corp taxation astatine 19%.

But lipid and state firms person been capable to trim the magnitude of taxation they wage by factoring successful losses oregon spending connected things similar decommissioning North Sea lipid platforms.

In caller years, specified methods person meant that BP and Shell person paid astir nary taxation successful the UK.

BP and Shell some received much wealth backmost from the UK authorities than they paid each twelvemonth from 2015 to 2020 (except 2017, erstwhile Shell paid much than it received).

Shell besides paid a antagonistic magnitude of taxation successful 2021, taking its 2015 to 2021 full to -£685m of taxation successful the UK.

In March 2022, Shell said that it planned to spend betwixt £20bn and £25bn connected UK vigor implicit the adjacent 10 years.

But successful November, UK brag David Bunch told the Confederation of British Industry conference that the institution would present "have to measure each task connected a lawsuit by lawsuit basis", due to the fact that the windfall taxation meant it had "less to invest".

BP plans to spend a maximum of £18bn connected the UK's vigor strategy by the extremity of 2030.

In May 2022, BP main enforcement Bernard Looney told the Times paper that each of the company's planned UK investments would transportation connected careless of immoderate windfall tax.

In July, UK brag Louise Kingham told a committee of MPs that the institution had initially been acrophobic astir the windfall taxation being a "multi-year proposal", but that the December 2025 deadline had been "helpful".

BP has not commented publically since the 2028 hold announcement.

In December 2022, French lipid institution TotalEnergies said it would chopped its planned 2023 concern successful the North Sea by a 4th - oregon £100 - arsenic a effect of the hold to the windfall tax.

It wants the authorities to hold to reappraisal the windfall taxation if lipid and state prices autumn beneath a definite level earlier 2028.

EU ministers estimation that they tin rise €140bn (£123bn) from the levies.