Shell takes eye-watering £1.9bn hit after UK taxes its excess profits

Autumn Statement: Jeremy Hunt outlines plans for windfall taxes

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Energy giant Shell is expected to take a staggering $2.4billion (£1.9billion) hit after getting slapped with a tax on its excess profits by the EU and UK. It also marks the first time in five years that the oil major paid tax in the UK North Sea following the increase to the energy profits levy. In 2022, Shell raked in record profits as a result of shocks to the volatile global fossil fuel markets due to Russia’s war in Ukraine. Meanwhile, millions of citizens across the UK and Europe saw their energy bills soar

In October, Shell Oil UK announced a doubling of its profits, stacking up £8billion profits in just 13 weeks. But the UK-headquartered oil firm said it had not paid a windfall tax levy and did not expect to throughout 2022 as it spent large sums on drilling for more oil in the North Sea.

However, Shell said it has finally been slapped with an undisclosed tax bill under the levy for the profits it raked in for last year. It added that some of this cash had been paid out to the exchequer. The firm received tax rebates from Britain in the previous four years.

The company also admitted that it would book a $2billion (£1.65bn) one-off charge in the fourth quarter for windfall taxes in the EU and the increased energy profits levy in Britain. 

This added to a $360million (£297million hit the firm already disclosed to investors in its third-quarter results for October, taking the total losses from EU and UK taxes to almost $2.4billion (£1.9billion). 

Back in November, Chancellor Jeremy Hunt announced that he would toughen the existing windfall tax on North Sea oil and gas operators by boosting the tax from 25 percent to 35 percent and extending it by two years until 2028.

Shell reaped the benefits of an 80 percent investment allowance linked to the UK windfall tax in the third quarter, which was reduced as part of the autumn budget. The firm is expected to have paid between $4.3billion (£3.5billion) and $4.7billion (£3.8billion) in taxes across the globe over the fourth quarter.

Shell’s previous boss, Ben van Beurden, said that the company deserved to be taxed for its excess profits as Governments needed to protect the “poorest” from skyrocketing bills. 

He told an energy conference in London: “One way or another there needs to be government intervention. Protecting the poorest, that probably may then mean that governments need to tax people in this room to pay for it.”

Alexander Kirk, a campaigner at Global Witness, told that the Chancellor could go even further with the tax on energy giants. 

He said: “The money that is needed to cover the high cost of energy is coming out of the pockets of small businesses and bolstering the eye-watering profits being made by big oil and gas companies. It takes a political decision to more effectively tax these profits in order to generate more funds for the Government to support those struggling to pay their energy bills.”

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“Later this month, big energy firms will publish their annual profits and underline how much richer they became through the economic crisis that is impoverishing millions of people. It is time for the Chancellor to state clearly whether he stands with big, rich polluters or with the rest of us who are getting even poorer.”

Shell later unveiled that it its bumper earnings through 2022  tallied in at $9.5billion (£7.8billion) in the third quarter of the year. That is double its earnings in the same period a year earlier but lower than the previous three months.

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