MORE than a dozen oil and gas companies have been investigated by HMRC for underpaying taxes on energy profits.
According to information obtained by a Freedom of Information request by the multinational law firm Pinsent Masons, 14 oil and gas companies have been investigated by HMRC for suspected underpayment of the Energy Profits Levy.
The Energy Profits Levy, introduced in May 2022, is a windfall tax on the UK profits of oil and gas companies.
Since the levy came into effect almost three years ago, HMRC’s investigations into energy companies have already brought in £125 million in tax.
HMRC confirmed the number of investigations which have been carried out but did not provide details on the number of cases which have been either closed or still active.
Since the levy’s introduction, businesses have needed to apportion their income and expenditure before and after May 2022, which HMRC will review whether the apportionment method is “just and reasonable” as envisaged by the legislation.
Jake Landman, partner at Pinsent Masons, said that HMRC typically takes a more lenient approach to investigations during the first year of a newly introduced tax.
However, new data on the Energy Profits Levy suggests HMRC is “focused on compliance” from the outset of the Energy Profits Levy.
In the year to March 31, 2023, the levy brought in £2.6 billion in tax, exceeding the initial projection of £1.13bn, and raised to £3.6bn the following year.
The tax rate for the levy has increased twice since its introduction, which currently sits at 38% and changed in November last year.
Landman said HMRC is more likely to take an interest in company apportionment during the period when the tax amount changes.
He said: “The Energy Profits Levy is an extremely high-profile new tax and HMRC is treating compliance very seriously.”
“Normally when a new tax is introduced HMRC takes a “soft launch” approach to enforcement. But with the levy set to expire in 2030, HMRC is enforcing compliance strictly from the very beginning.”
“HMRC still has time to make enquiries for companies for the first year of the tax so we could still see investigations and extra tax take continue to rise.”
A HMRC spokesperson said: “We’ve engaged with customers and sector bodies since the introduction of the Energy Profits Levy to ensure effective compliance and to help customers get it right first time.
“The Levy plays an important role in supporting the transition to clean energy and our investigations have brought in £125 million so far.”
