Kirsten White (KW) Chair UKOITC
Phil Greatrex (PG) Brindex
Jacqui Akinlosotu (JA) OTAC
Chris Waterton (CW) UKOITC
Agustin Rivara (AR) O&GUK
Gordon Dennis (GD) UKOITC
Jo Wakeman (JW) - HMRC: LBS Oil and Gas Sector Lead
Rob Hodges (RH) - HM Treasury
Phil Slarks (PS) - HM Treasury
Hugh Hedges - HM Oil and Gas
Diane Williams (DW) - HMRC: LBS Oil and Gas
Peter Harrington (PH) - HMRC: LBS Oil and Gas
Paul Philip (PP) - HMRC LBS Oil and Gas
Tony Chanter (TC) - HMRC LBS Oil and Gas
Stephen Constable - Notes
Russell Malloch (HMRC LC Team)
Peter Gunn OGIA
1. JW welcomed everyone to the meeting and formal introductions were made.
2. The minutes of the previous meeting were agreed.
3. Action points from the previous meeting were considered.
Operational guidance
4. Operational guidance on Field Allowance would be ready for issue shortly.
Also, it was hoped to get guidance on all the Finance Bill changes into
the HMRC Oil Taxation Manual towards the end of September 2009. When ready
and before publication the draft guidance would be sent to UKOITC for
consideration and review by industry stakeholders.
Chargeable gains
5. HMT and HMRC are aware of a few open issues, including the issue of
taking into account cash adjustments on both sides of a transaction and
E-drilling costs. Mike Manderson who is a member of UKOITC's sub-committee
looking at these issues will follow up with HMT.
Licence expiry
6. HMRC owed the Industry a letter although they didn't feel there was
anything which merited amending the legislation. HMRC appreciate the comments
made but they consider the legislation as drafted fit for purpose. Post-licence
transfer issues would be discussed in due course.
Field Allowance
7. The new Field Allowance provisions have been generally welcomed by
industry. There is however a concern that the qualification criteria for
ultra high pressure, high temperature (HPHT) fields are overly restrictive
and so might not stimulate the additional exploration/development activity
hoped for. HMT are aware of this concern and there had been an exchange
of letters with OGUK. HMT are willing to discuss the matter further and
consider evidence that would support a proposal to change the criteria.
8. UKOITC stated that Field Allowance works on a company by company basis and asked whether there was any reason it couldn't operate on a group basis. There was some discussion around this issue and HMRC agreed to set out why the legislation is couched in the terms it is.
Action point 4: HMRC to set out its views on why the legislation is couched in the way it is.
West of Shetland ('WoS')
9. HMT did not feel that there was enough evidence in support of a targeted field allowance for WoS. However, if there was further evidence HMT would be happy to consider it.
Tight gas
10. It was noted that there is ongoing discussion between OGUK, HMT/HMRC and a number of companies about the issues relating to production from tight gas reservoirs.
Decommissioning
11. A meeting is being held on 28 July 2009 to discuss IHT and other issues
relating to decommissioning cost provision deeds.
12. HMT/HMRC have a meeting arranged with O&GUK regarding letters of credit. The current requirement for decommissioning security to be made on pre-tax basis resulted in higher costs that, for smaller companies were difficult to carry, and the Industry was keen to move to a position where security could be provided on a post-tax basis. HMT agreed that this was an issue they were keen to further explore, and discussions with industry stakeholders were already taking place.
13. Draft guidance has been sent to members of the public Bill Committee for comment by business. Final guidance would be issued once the Finance Bill receives Royal Assent. HMRC would send the current, draft guidance to representative bodies.
14. A proposal had been made for a session to be included on the SAO measure at this year's conference. This was being considered by the Conference Planning Committee.
Action point 5: HMRC to circulate current guidance to industry representative bodies.
15. KW asked whether there was anything in respect of PRT uplift/incremental investment. This was on the O&GUK agenda. KW said that there was quite a lot of passion expressed by some companies and discussions seemed quite fragmented. She said that the issue had been brought up by DECC. HMRC said that it had to be cognisant of the economic climate and the deadweight costs to the Exchequer had to be examined and the fact that an election would be coming up soon would add to this and HMRC were waiting for a body of evidence.
Change of use
16. PP had written to industry on this. Legislation was in the Finance
Bill. The Industry view was that there were a few points to be taken up
in the long term.
17. JW provided a quick update on HMRC Business Planning and how this was being developed into more detailed Departmental planning and targets. As she had mentioned at the UKOITC away day, the Business Tax Business Plan had been published at the beginning of May 2009; this provided more clarity on how that part of HMRC would contribute to delivery into HMRC's key strategic objectives. In particular she thought HMRC's first two objectives would be of interest to industry:
18. The Business Tax Business Plan described at high level the activities to be carried out to help achieve these improvements. A key development was that these objectives were now the joint responsibility of the different Business Tax areas; this should help address industry concerns about circumstances where progress in resolving issues appeared to stall where decisions required wider HMRC involvement beyond the CRM.
At a further level of detail, LBS was currently finalising its Tactical Delivery Plan which would describe specific Key Performance Indicators for LBS to support delivery of the Business Tax and HMRC Business Plan.
19. Again focusing on KPIs that would be of particular interest to industry, JW said that LBS would be targeted to settle all issues over eighteen months old at 1 April 2009 except for cases subject to litigation. It was recognised that, in exceptional circumstances, there may be aspects of a case affecting resolution, such as civil litigation.
20. In addition, the Sector would be targeted to resolve issues within 18 months against a rolling measure. The target would be an annual average based on monthly performance across the year.
21. JW said work was planned this year to develop an auditable measure of 'low risk' which was likely to extend beyond the current risk framework contained within the Tax Compliance Risk Assessment Guidance. This did not, however, run counter to the LBS' aim to increase low risk behaviours.
22. PG asked whether formal enquiry letters might be expected to be issued earlier in the year. Following some discussion on this point, it was agreed that it would be helpful for CRMs to discuss the risk assessment timetable with their customer groups where possible. This would help both parties manage their resource effectively and understand the resource constraints faced by the other party. JW noted that this was not a specific KPI but was an indicator of an open and transparent relationship. JW confirmed that the outcomes from the discussion would be passed to Local Compliance colleagues.
PRT update
23. PH provided an update on PRT, outlining the changes and current developments on the PRT team. He said that PRT teams needed to be compliant with Tax Compliance Risk Management Process Guidance. He indicated that there were arrears (some internal to HMRC) which were not consistent with indicators. Stock was currently being taken on assessments and open claims and a high priority to clear these was being adopted. A periodic stock-take was also taking place on risk in PRT given that HMRC had to maintain the integrity of the tax. O and G accepted that most PRT fields were in the production phase which was technically more straightforward but there was risk particularly because of the taxable and non-taxable divide.
24. Indicating where HMRC were going with PRT PH said there would be some change in operation. As an example first claims audit would continue but we would be using auditors where appropriate. They would not quite be the first claims audits of the past; and we would expect to involve auditors in systems failures. PRT's approach to compliance would be more a systems-based approach.
25. Project work was taking place to maintain the integrity of the tax. Currently there were a couple of projects - a gas project on non arms length sales which may involve coming out to companies for information; this was also a minor project on LPG valuations.
26. PH hoped that at the next meeting a paper would be presented to UKOIT re the direction of travel, to give UKOIT an opportunity to comment and formalise it. He indicated the over-arching point was to fully align PRT with tax compliance risk management process and mainstream issues. There was also the intention to produce revised guidance by the end of the year. While there was expected to be a change in compliance it was a matter of repositioning; it was not expected to involve an additional compliance burden for companies.
27. On the gas project HMRC were looking at gas methodologies and trying to get a more complete picture, putting something in place where companies can do the values themselves on a self assessment basis.
28. HMRC would say more on PRT at the next meeting.
29. No operational issues were raised from UKOIT.
30. This was newly included as a standing agenda item but nothing was raised by either side.
31. JW said the summary of discussions at the UKOITC away day had provided a useful starting point for dialogue around this subject, and she thanked UKOITC for sharing these with HMRC. KW indicated that she was happy to take feedback in the other direction.
32. During discussion the following points were made:
33. KW said that the UKOITC meeting on 9 July 2009 would discuss the proposal to consider the role of the CRM more fully at the next Oil and Gas Industry Direct Tax Forum meeting. She favoured a two-tiered approach; initial deliberation among a relatively small group of people before extending the debate more widely.
34. A planning meeting had been held on 24 June 2009, the agenda was developing with expected finalisation towards the end of July 2009.
35. This would be discussed at the UKOITC meeting tomorrow and any ideas from the meeting would be passed to HMRC.
36. JW said that the discussions that day supported the need for an amendment of the Forum's terms of reference to reflect the central involvement of both LBS and Local Compliance.
37. There was none.
38. 13 or 15 October 2009 were suggested by HMRC and UKOITC would confirm which, if any, was suitable. A similar start time of 15:00 was suggested.
Action point 1: Joint Planning Committee to confirm
e-filing and XBRL are on the agenda for the Conference in November.
Action point 2: HMRC to ask Jeff Smith to arrange a further
e-filing meeting with Industry in September.
Action point 3: HMRC would circulate a copy of the cushion
gas letter to Industry representative bodies.
Action point 4: HMRC to set out its views on why the
legislation is couched in the way it is.
Action point 5: HMRC to circulate current guidance to
industry representative bodies.
