Shell has announced that it will pay tax in the United Kingdom for the first time since 2017 after its massive profits last year.

The energy company said it expected to “take a hit” of around £1.7 billion ( $2 billion) on profits in the United Kingdom and the European Union in the final three months of the year.

Governments have imposed taxes on energy companies in order to recoup some of the massive profits generated by high oil and gas prices.

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Shell will not reveal how much UK tax it will ultimately pay.

At this point, it is believed that the figure may be lower than expected.

After accounting for losses and investments in areas such as renewable energy or decommissioning North Sea oil platforms, the amount of tax oil and gas companies pay in the UK can be reduced.

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Shell reported a huge increase in profit last year, reaching $9.5 billion across its global business between July and September.

The company claimed at the time that because it had made large investments in the UK, it had not made a profit and thus was not required to pay taxes.

However, Shell has now confirmed on Friday that it expects to pay some tax in the UK for the first time since 2017.

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It comes after the government raised the tax on profits made from extracting UK oil and gas from 25 percent to 35 percent in November, under a policy known as the Energy Profits Levy, also known as the windfall tax.

Shell did not specify how the $2 billion hit to its earnings in 2022 would be split between the UK and the EU.

Oil and gas prices began to rise following the end of Covid lockdowns, but surged following Russia’s invasion of Ukraine, resulting in record profits for energy companies like as Shell and BP in 2022.

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In response to pressure from consumers facing skyrocketing energy costs, the government enacted a windfall tax on corporate profits to help pay for a plan to cap gas and electricity prices.

Companies that operate in the North Sea’s oil and gas industry are taxed differently than other businesses.

They pay a combined rate of 30 percent corporate tax and an additional 10 percent rate on their profits. They now pay the windfall tax on top of that, bringing their overall tax rate to 75 percent.

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Higher taxes, according to Offshore Energies UK, would “undermine” an industry that supported 200,000 people with jobs.

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After earning a $30 billion profit for the first nine months of last year, Shell is still on course for record annual profits in 2022, despite having to pay higher taxes.

The business stated that it anticipates paying between $4.3 billion and $4.7 billion in global taxes over the last three months of 2022.

Source: BBC News

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