Member Info for TerryM1

https://www.telegraph.co.uk/politics/2022/11/26/water-windfall-tax-energy-industry-will-collapse-jeremy-hunt/
First part

Chancellor told he risks 'destroying' North Sea production altogether after increasing the levy from 25 to 35pc
ByCamilla Turner, CHIEF POLITICAL CORRESPONDENT26 November 2022 • 7:00pm
Jeremy Hunt’s windfall tax on oil and gas giants must be watered down to avoid industry collapse, Tory MPs have warned.
The Chancellor has been told that his so-called energy profits levy is “too blunt an instrument” in its current form and risks “destroying” North Sea production altogether.
It comes amid warnings from companies involved in North Sea oil and gas exploration that the sheer level of taxation now poses an "existential threat" to their industry and will lead to investment becoming "unviable".
Mr Hunt and Rishi Sunak, the Prime Minister, have faced criticism that the Autumn Statement did not include enough measures to spur economic growth.
Mr Hunt increased the windfall tax on North Sea oil and gas producers from 25 to 35 per cent, while also announcing it would be in place until 2028 rather than 2025, adding £19.4 billion to the existing bill.
The Chancellor has been told that his so-called energy profits levy is 'too blunt an instrument' in its current form CREDIT: Zara Farrar
MPs believe that unless a “sensible” floor price is agreed, energy firms will be “crippled” with higher taxes even when their profits fall.
Discussions are underway among rebel MPs about drafting an amendment to the Finance Bill - which is expected to be returned to parliament this week - to address this point. Some backbenchers have written to the Chancellor to express their concern about the windfall tax, while others have made their disquiet clear to the chief whip.
Sir John Redwood MP told The Telegraph that the windfall tax in its current form is “excessive” and will “damage the industry” as he urged ministers to “see sense”.
“We need to get as much oil and gas out of the North Sea as possible,” he said. “I don't believe it is a windfall tax if it doesn't stop when profits fall - it is just another tax on business, another tax on a business that is temporarily generating a lot of income but in the past has had heavy losses.”
Craig Mackinlay MP, the chairman of Net Zero Scrutiny Group, added: “We want more domestically derived energy. You do not get more domestically derived energy by taxing it more.
“While some of the supersize companies can accept they have had it pretty good for a while, what if those good times don't last? What happens if you have a more modest, normal profit? Are we going to still tax at 75 per cent? It is too blunt an instrument.”

As others have stated IWEB, Halifax and other banks take 30% even with W8-BEN. I also find that some I had in Quilter Cheviot and Fineco have the 30% tax.

Moved these to HL (outside ISA) and with W8-BEN 15% there are no further UK taxes to pay, however as I am over the allowance for dividend tax really only paying an additional 6.25% on UK stocks. With the new reduced allowances and the increased dividend tax these are becoming more attractive for UK holders outside an ISA. I do not hold these in an ISA as will be the same dividend tax so use my ISA allowance for other companies and save 8.75% and 20% on REITs.

Not sure I understand this, if you buy less or more shares that the amount sold within 30 days the rule still applies. The calculations are a little complex and the tax liability depends obviously on the prices and amount sold and bought.

An example where you buy less shares within 30 days from
https://techzone.abrdn.com/public/personal-taxation/Practical-G-Share-match#:~:text=The%20share%20matching%20rules%20mean,bed%20and%20breakfast%20rules')

Example:

Julie purchased 10,000 shares in fund B for £28,500, i.e. £2.85 a share. The fund has done really well, with share price now £9 per share. Julie sells the shares without considering how much the capital gain might be.

Sales Proceeds (10,000 x £9) £90,000
Cost ( £10,000 x £2.85) (£28,500)
Capital Gain £61,500

Julie is advised that she now faces a potential tax bill of £9,840 as a higher rate taxpayer (£61,500 - £12,300) at 20%.

One option available to her is to buy back shares in Fund B. The share price has remained the same. So Julie buys back 8,000 shares at a cost of £72,000.

The impact on the capital gains calculation is as follows:

Sale Proceeds (£10,000 x £9) £90,000
Matched:
Cost of 8,000 repurchased
(8,000 x £9) (£72,000)
Cost of 2,000 from original purchase
(2,000 x £2.85) (£5,700)

Capital gain £12,300

The original disposal has still occurred, however, ‘bed and breakfast’ rules mean that the subsequent repurchase of shares is used first and the balance taken from remaining share cost from the original holding.

In this example, triggering bed and breakfast rules has reduced the potential capital gains tax liability from £9,840 to nil.

With more and more western countries imposing WFT on O&G and less exploration in the US due to increased chance of a democrat victory in the next presidential election this should start to push the price of O&G up in medium term especially in the west. At best only a few developments with the most promise will be developed in the west leaving non western producers a free hand. These are more likely to supply China, India etc where they know they have a long term growing market and better political ties.

The 30 day rule is a little complicated and only applies to transactions where both the sale and repurchase are outside a tax wrapper i.e. ISA or SIPP.

Charges and stamp duty paid are counted as part of the purchase and sell price.

This applies to transactions taken place with 30 days of each other.

If you sell and buy the same number of shares for the same amount no capital tax implications.

If you sell and then buy the same number of shares for less money then you will have crystallised a gain, if under the threshold including any other loses for this or unused from previous years no tax liabilities. However if you have a loss of say £200 from another transaction and you make £200 on this although under the threshold you wipe out the previous loss and cannot carry the lose forward to into next year.

If you sell and buy the same number for more money then you will rebase your purchase price so decreasing the gain when you eventually sell but of course you have put more money in.

It gets even more complicated when there is a part sale and/or part repurchase.

I am not an accountant and this is for guidance only so please do your own research, there are many articles on the Web on this subject.

The problem with continually investing the profits is that it only makes sense if the WFT is removed at some point, I believe this is here for a very long time way beyond 2028. It is a cheek calling it a WFT, it is just more tax from a government wedded to more and more taxes.

If you reinvest all your profits there are 3 outcomes, it is a duster and you lose everything, it is successful then the WTF tax will be applied to the new development or the price of gas goes down and it becomes unprofitable. There is no way to get the money out to shareholders without paying 75% tax and then the shareholders pay an additional 8.75% tax. If you keep reinvesting all the profits to avoid the WFT it is a bit like gambling all you winning until you lose.

Also when Labour get in after the next election the assets will be nationalised with very little compensation

So investing in O&G in the UK means pay lots of tax today or lots of tax tomorrow or lose on a duster or lose if prices drop and/or get nationalised. Also there is the threat of even more tax when the government feels like it.

The path seems clear to me all new investments should be outside the UK in a more friendly country.

Shakeypremis I think you make a good point

The underlying point I was making is that the government are lazy cowards and self severing with no regard to fairness or the good of the country and it’s people, they go for the easiest targets. It would have been much harder and better for the country to cut spending but they kicked this into the long grass after the next election where they know there is no realistic chance they will be in power. Also they could stop expensive illegal immigration, recover money paid out on frauds, put control on ESG spending but all far too difficult. Their sole aim is to hold on as long as possible and so maximising their income and pensions.

I saw this coming once the lockdowns became entrenched in government policy along with the ESG agenda so I moved a lot of investments into Big Oil, Miners and DEC as these are mostly as out of reach of any one government except of course DEC which out of reach of the UK government. My thinking back in 2020 was that inflation would take off due to money printing, governments would be short of cash so would hit the companies they could i.e. the ones solely in their jurisdiction. Therefore the best strategy was to buy multinationals with stuff in the ground which is in effect inflation proof, Glencore was my biggest purchase as they seem more or less immune to any single county tax raids and they ignore the ESG pressures, have to add also bought Polymetal which is obviously a disaster so not all good but was not even aware of the Ukraine situation at that point, nobody was. Wish I have believed in myself more as I have just offset losses in REITs and other shares. Serica was a small punt hoping to be taken over by Kistos and increase my small Kistos holdings, if not hopping the directors would put up a big defence with increase dividends and good news so increased share price, win win, however as always I get hit by government interference and poor management. My loses are not great but I do feel for those shareholders with a much bigger holding that did everything right in investing in Serica but got shafted by the government. The ball is now clearly in the directors court, do they sit and take and wait to be nationalised proving they are also lazy or move as much as they can out of the UK, if they do I believe there is a good future for Serica and it's shareholders as it is only the west which is attacking O&G and the future rests with China, India, South America etc..

The tax changes do not hit the smallest investors as they can invest in an ISA and will still have a small dividend and capital gains tax free allowance.

The larger investor is not hit very much proportionally as most of the income will already be over the allowance thresholds.

As always it is those in the middle that will bear the brunt of the tax increases, the golden rule for government is leave the big and small guys alone, the big guys are too powerful, give donations the political parties and can easily move elsewhere, increasing the small guys tax will produce a large outcry in the press and he does not pay much tax anyway. So the government policy is to go for the easiest option, attach the middle earners as they are unlikely to move out of the UK in any significant numbers and no support from the mostly left wing press as they have the biggest shoulders and can afford to pay more.

Also other government policies are find a small group of tax payers who are not popular e.g. buy to let landlords, IT contractors and now those with the cheek to not spend all their money (so not paying VAT etc) and want to invest for the future and tax them into oblivion. They don’t count as they are a small % of voters and are generally not liked. Also another government policy is to take away peoples self sufficiency so they become dependent on the state and are easier to control.

It is pointless basing future investments on ways to offset the WTF, it will not be long before these rules are changed to extract more money from O&G, it was not long ago there was an outcry because Shell offset these against new investments and the left wing press and Labour were shouting that this had to be stopped. Anything that Labour says today will become a Tory policy tomorrow.

There may be ways to mitigate some of this tax for now but the bigger picture is the UK is very fundamentally unfriendly for investments and doubly so for O&G so the only viable option is to invest outside the UK.

My guess is Russia was friendlier to BP and Shell than western countries before they were forced out by the UK government.

Its official, this government is a seriously socialist going on communist.

Corp tax up 30%

Dividend tax up 23%

Additional corp tax for O&G

WFT now 35% for O&G giving total tax at 75% ignoring other taxes like business rates, employer NI, VAT, etc, etc, etc.

Capital gain tax exemption reduced from £12,300 to £3,000 over a couple of years

Dividend tax exemption reduce from £3,000 to £500 over a couple of years, under Labour had no dividend tax on basic rate, under Conservatives first 7.5% now 8.75% with soon only £500 exemption

High rate tax staring point reduced by £25,000, other tax bands frozen for years so eaten away with out of control inflation

Increased IR35 regulations so more work goes to Indian IT companies

Regulations out of control

Money printing out of control

However if you chose not to work which is becoming a real trend you get a 10.1% increase in benefits, much more than those who work especially taking into account all the putative taxes

Also illegal immigration out of control, all welcome, even if you are a criminal, you get a welcome pack including a new smart phone, all expenses paid in 4 or 5 * hotels plus spending money, no need to work also access to dentists, health care etc. Just say you are a 16 years old male no matter how old you are and you get put into education with 16 year old girls and given a free place of you own when you get to 19.

Anyone else thinking of leaving the UK, if not only viable option spend everything and live off the state, they will get it otherwise through taxes. As our betters in the World Economic Forum tell us “You will own nothing and be happy”.

The so called conservatives had done just what labour wanted, increase WTF to make UK O&G companies shares drop so when they get in they will be able to nationalise these with very little cost and also use the excuses that these companies are not developing the UK assets so we must take them over for the good of the country.

Not sure there is any point in buying O&G developments even at fire sale prices in the UK or possibly any other investments in the UK. Any profits will be taxed so highly for the foreseeable future there is not enough to make it worthwhile. It is all very well offsetting profits with new developments but these will be taxed at punitive rates if profitable or the profits would need to be ploughed back into even more new developments for ever or until the new developments proved to be a flop. The same as trying to become rich by betting and putting all your winnings into another bet until you loss everything.

You would think that Rishi has some sort hidden green agenda against O&G on top of the one where he bans fracking and a hidden agenda to turn all money over to the state so he can give it away to who he thinks deserves it including foreign governments and causes.

Add in the toxic mix or an ever increasing WFTs, corporation tax, capital gains tax and dividend tax, along with more regulations, the swift removal of any PM (even if elected) who wants to stop tax increases or perhaps even cut a little and perhaps cut government spending along with Labour’s nationalisation. Fool me once shame on you fool me twice shame on me.

IMO the companies with the brightest future will be the ones that leave the UK to domicile in a friendly country where they do very little business so can move out at the drop of a hat if that country turns on them. Glencore is a good model, diversified throughout the world and domiciled in Switzerland, so can easily leave any Country that turns hostile (and does), the threat alone is usually enough to prevents bad government behaviour. This is more difficult for small companies but is the model I believe is the future as it is the only way to stop/mitigate these type of attacks.

I also feel sorry for those struggling to pay for heating and many small businesses close to collapse but blaming and taxing Oil&Gas produces in your country big or small is not the answer. The main issue to consider is not the price but continuity of supplies, if restrictions or blackouts occur or there is no petrol or diesel at the pumps this will be far more costly.

The big boys are not being left along, BP paid a lot of WFT and Shell only avoided this but putting large amounts of cash in the UK which will be heavily taxed at a later date or make no money on the green investments. You should also remember BP and Shell were forced to give up £25 billion of Russian assets with no compensation. The answer is not to pit the large and small produces against each other but a concerted response to government, we are not going to take this an longer.

These high prices were caused by governments around the world (the UK government is probably the worst). First create a green addenda which restricts Oil & Gas production with no viable alternative, lock down on/off for an indeterminate period which when lifted with very little notice creates supply chain problems. Put sanctions on one of the largest produces in the world when already a shortage. What did the west think Russia would do, sit and take it or retaliate and send its Oil and Gas to China, India and the rest of the non western world. Don’t get me wrong I support Ukraine as far as reasonable but don’t pursue a policy which hurts yourselves more than Russia, US is OK as they have lots of Oil and Gas due to Trumps policies.

Unfortunately our politicians are worse than useless, a self serving bunch blaming everyone but themselves for the mess they created, looking for cheap headlines and subverting democracy to get the leader they want. If a politician calls for taxes not to go up (not tax cuts) they are hounded out of office by all parties including their own and a left wing press headed by the BBC. These politicians have no knowledge of history, every time taxes are put up, more restrictions, more government spending and money printing the economy collapses, however reduce tax, reduce restrictions, cut spending and do not print more money and economy rises. Look at 1970’s Labour against 1980’s Thatcher, 1930’s US new deal against 1930’s UK polices and post war US policies. Not only are there many more examples of this but happens every time. However in may well be more sinister that politicians known full well what they are doing but have a different agenda, i.e. World Economic Forum Great Reset also own nothing and be happy, check this out very scary.

Not only are more taxes and green regulations a very great risk there is also the threat of a Labour government nationalising the UKs Oil and Gas assets. The UK now is uninvestable, fool me once shame on you fool me twice shame on me.

The only viable option is to pay out excess cash to shareholders or invest in a country that does not intend to destroy your business.

Diversified Energy Achieves Gold Standard Pathway in United Nation’s Oil & Gas Methane Partnership 2.0 for Ambitious Methane Reduction Plan

https://finance.yahoo.com/news/diversified-energy-achieves-gold-standard-110000863.html

Perhaps Bloomberg Green might like to report on this after their scathing biased attack a couple of years ago which trash the share price.

This biased article on the last quarter update contains a lie in that the dividend is raised 10%, in fact it was a year ago when the dividend was raised after a 50% fall from pre covid levels. Also no mention that in the official BP report

"Profit (loss) for the period attributable to bp shareholders (2,163)"

i.e. $2.163 billion loss

I have raised a complaint with the BBC and when rejected will take it to Ofcom

The Investment bank is the jewel in Barclays crown for many years, but got downsized as a result of Antony Jenkins taking over Barclays after Bob Diamond got ousted by the Bank of England. The BOE used the excuse of the Libor mistakes made by Barclays under Bob Diamond and got him replace with Antony Jenkins a domestic banker who did not like or understand Investment Banking. Many banks made these Libor mistakes, some a lot worse but no removal of CEO except Bod diamond. He made the mistake of owning up first to clear the decks of these loans and the BOE wanted him out because he refused to take BOE loans in 2008 crisis and went to Qatar so Barclays was not under the control of the BOE, also BOE want to see the end to Investment Banking in the UK and Barclays Capital is the is only one left.

After Antony Jenkins got fired due dismal profits caused by running the investment bank down the investment bank is recovering, just hope at some point it feeds back to increased dividends and share price.

In 2 to 3 years time we will unfortunately have a Labour government who after pressurising for more and more WFTs will say the OIl&Gas companies are failing the UK and take them into public hands as already stated by Keir Starmer. Rishi will have got his 15 minutes of praise for doing labour's bidding and slaying the nasty energy company dragon and hoped to keep himself in power until the next general election, after which he will add to his already huge family fortune with directorships etc with big US banks. Win win for everyone except the UK public.

Difficult to know where this all ends and what the government is trying to achieve except short term populist policies or take over.

Although Oil&Gas is being hit the hardest also talking of taxing renewables and energy generators and of course all other companies with 30% increase in corp tax plus dividend tax increase but no tax for big US tech.

Is the government trying to create a crisis in energy and stop all new money coming in to allow them to step in and take it over for next to nothing keeping all profits for the government like labour’s policy. Remember they did this with banks like Bradford & Bingley which left shareholders with nothing and the government a tidy profit.

One thing history has taught us that once the government finds a new tax they will keep increasing it until something breaks. George Osbourn WTF destroyed new exploration in the NS but rather than drop the tax and make himself look foolish he had to create grants.

The problem as I see it is if a company wishes to avoid the WFT it needs to keep reinvesting it’s profits, then the profits on the new investment will need to be reinvested and so on like some sort of ponzi scheme in reverse. Fine if the WFT has a fixed end date in the not too distant future but not good if the government keeps extending it, after just a few weeks looks like it is extended for 3 years. There is no money for shareholders in which case why invest unless you intend to give all your money to the state, I guess they get it one way or another.

The big multi nationals get a say and of course they will do their best to prevent the small outfits succeeding and why not, it is up to the government to prevent this but don’t hold your breath. They did this in IT with IR35. The moral of this story don't invest in the UK as any success will be destroyed by government and the UK has become uninvestable except for multi nationals and even they will get a kicking. I knew this so most of my recent investments went to multi national Oils&Gas and miners (have just about kept me afloat), you need powerful companies to stop the government taking everything. I did think that Serica was a special case and invested a small amount but unfortunately I was wrong.

The problem is if you tax Shell too much they will stop investing in the UK and even move out like they did with Holland when it added extra taxes, for Shell this is the correct course of action as it has a duty to it's shareholders. I think the name change for BP to Beyond Petroleum is in preparation in case they need to leave the UK

What the government are looking for is sitting ducks like companies that are only in the UK if they were looking for fairness they would tax the big US tech companies but this far too hard and they are frightened to upset them.

However this is more pollical than financial as I think we all know the end result will be bad for the UK, first create a monster then slay it as can be seen by the buy to let taxes. Also if you find a new tax and even better if it is popular just keep putting it up not, dose not matter what harm you do as long as there is a short term gain, look what successive governments have done to pubs.