UK Tax Regime Changes Impact Oil and Gas Firms

• •UK tax changes exempt profits from foreign PEs starting January 1, 2027.
• •Oil and gas companies face earlier implementation from September 1, 2026.
• •Losses from foreign PEs can no longer offset UK profits, impacting investment strategies.

On May 21, 2026, the UK government announced changes to the taxation of UK-resident companies operating through foreign permanent establishments (PEs). Starting January 1, 2027, profits and losses from foreign PEs will be exempt from UK tax, with an earlier implementation date of September 1, 2026, for oil and gas companies. This change aims to prevent UK profits from being sheltered by foreign losses, impacting companies that rely on early-stage losses for tax relief. Experts warn that this could deter future investments in oil and gas exploration. The new rules will eliminate the ability to offset PE losses against UK profits, fundamentally altering the tax landscape for affected firms. Draft legislation is expected to be released over the summer of 2026.