Government U-turns on windfall tax for energy companies

Chancellor Rishi Sunak has introduced a "temporary targeted profits levy" on the unexpected profits of energy companies, U-turning on the Government's previous position.

The 25% tax will apply on the unanticipated profits energy companies have made during the period of high energy prices.

At the same time, the new levy will include a new 80% investment allowance, which the Government said "allows [it] to deliver support to families, while encouraging investment and growth".

Earlier this month, Conservative MPs voted down a Labour motion to introduce a similar tax on oil and gas companies.

The Government hopes the levy will raise about £5 billion of revenue to help fund a new £15 billion energy support package for the people struggling the most during the cost of living crisis.

Sunak said 8 million households would get a one-off "cost of living payment" of £650, directly to people's bank accounts.

The levy will be phased out when the current high prices of energy fall, with a ‘sunset clause' written into the legislation.

Hannah Essex, co-executive of the British Chambers of Commerce, said:

"The sheer scale of the cost-of living crisis facing the British public means the Government is absolutely right to provide additional support to those worst affected."

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