In Tax Journal Article, Stuart Sinclair and Serena Lee Discuss Tax Traps in North Sea Oil and Gas Assets
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Tax Journal has published the article “Distress in North Sea oil and gas assets: tax traps for the unwary,” written by Stuart Sinclair and Serena Lee, partner and associate, respectively, in the tax practice at Akin Gump. The article examines the opportunities that have arisen for investment funds and other non-bank lenders to invest in companies operating on the UK Continental Shelf.
Sinclair and Lee write that while low oil prices have created these new investing opportunities, “there are also a number of potential bear traps for the unwary.” They then outline what some of them are, including:
- potential non-resident capital gains tax charges for both equity and debt holders
- ‘hidden’ decommissioning costs, which arise where the company has provisioned for decommissioning costs on a post-tax basis but has no capacity to benefit from any tax relief
- difficulties in preserving carry-forward losses on a sale, as well as more general UK tax issues, which can apply to the restructuring of debt owed by any UK company
The article concludes by noting that several other UK tax issues could arise in the context of a debt restructuring. In addition, the authors point out that there could be tax implications from changes to the terms “of a debt instrument falling short of a reduction in principal amounts owed.”
First published in Tax Journal, the article is reproduced with kind permission of the publisher and can be read in in full by clicking here.
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