Petroleum revenue tax (PRT) is a direct tax collected in the United Kingdom. PRT is administered by the Oil Taxation Office of the UK Inland Revenue, which also adminsters the "ring fenced" corporation tax paid by oil exploration companies, and previousl administered the royalty charged on the gross value of oil and gas won.
PRT is charged on "super-profits" arising from the exploitation of oil and gas in the UK and the UK's continental shelf. After certain allowances, PRT is charged at a rate of 50% on profits from oil extraction. PRT is charged by reference to individual oil and gas fields, so the costs related to developing and running one field cannot be set off against the profits generated by another field.
PRT was abolished on 16 March 1993 for all fields given development consent on or after that date, but continues in existence for fields established before that date. At the same time, the rate of PRT was reduced from 75% to 50%, but various reliefs from PRT for expenditure on exploration and appraisal were withdrawn.
PRT is charged in addition to corporation tax, which is also payable by companies involved in oil exploration and production, although PRT is deductible in calculating profits for corporation tax purposes. Profits from oil extraction activities are subject to a corporation tax "ring fince", which means that profits from these activities cannot be reduced by any losses or other tax reliefs from other business activities (the corporation tax ring fence fences off the whole oil exploration trade, not indivudual fields like PRT). Profits within the corporation tax "ring fence" have been subject to a supplementary corpration tax charge of 10% in addition to the usual 30% rate since 17 April 2002.
The supplementary charge to corporation tax was introduced to replace the 12½% royalty that was charged on the gross value of oil and gas won, which was abolished from 1 January 2003. The royalty was not a tax, as such, but was paid in exchange for the right to extract oil and gas which, under UK law, belong to the Crown. The royalty had been abolished for all oil fields given development consent after 1 April 1982, but continued to apply to existing fields after that date until 2003.