The Chancellor of the Exchequer’s threat to impose a windfall tax on gas and oil companies raking in huge profits from the rising cost of energy is understood to have caused a split between the Treasury and the prime minister’s aides.
Pressure is piling on Rishi Sunak to produce a package of support to ease the cost of living for millions of people struggling with higher food and energy bills.
Inflation has rocketed to 9 per cent, a 40-year high.
The opposition Labour party has called for a one-off tax on the profits of oil and gas companies to help households and energy-intensive industries.
The Conservative-led government has in the past ruled out a windfall tax on energy companies, but Mr Sunak has recently said such a levy could not be ruled out if companies are not investing enough in new projects.
“If it doesn't happen soon and at a significant scale then no option is off the table,” he told MPs in the House of Commons this week.
Boris Johnson’s cabinet is split over the idea, with some ministers “intrinsically opposed” to the levy, according to Kit Malthouse, a senior member of the government. However, he stressed that the policy has not been ruled out.
“We are intrinsically opposed to that kind of taxation,” Mr Malthouse, the policing minister, told Times Radio when asked about a possible windfall tax. “We want to see a pattern of investment from that industry that will help us with our medium and long-term energy problems.
“But the chancellor reserves the right to take all steps he thinks necessary and he's in conversation with that industry all the time, I'm sure.
“My predilection as a Conservative generally is to have low and stable and predictable taxes, and that retrospective taxation is to be avoided, but there are Conservative administrations in the past who have felt the need to tax retrospectively and sometimes the circumstances might warrant that.”
The oil and gas industry has argued that unpredictable tax policies could deter investment and hit jobs.
Officials at the Treasury are convinced a windfall tax now looks “politically unavoidable”, The Times quoted a source as saying.
Mr Sunak in April signalled a possible shift in policy by hinting at such a levy, telling parenting website Mumsnet “that’s something I would look at” if energy companies were not reinvesting their profits in the UK.
On Tuesday he reiterated his threat in the House of Commons, but said the government does not believe a windfall tax is a simple answer to the problem.
Mr Sunak is under mounting pressure from business leaders, charities and MPs from across the political spectrum to produce a package of support after inflation hit a 40-year high, with food and energy costs among the main concerns.
He appeared to acknowledge the need for further support for the poorest in a speech on Wednesday night at the Confederation of British Industry’s (CBI) annual dinner. He said “right now, we also have a collective responsibility to help the most vulnerable in our society.”
“And so, as the situation evolves our response will evolve,” he added. “I have always been clear, we stand ready to do more.”
While Mr Sunak wants to be seen to do more to help struggling households, he is also wary of inflicting further damage on public finances, which have taken a serious battering from the Covid-19 pandemic.
The Bank of England has warned Britain’s economy could plunge into a recession before the end of the year. It has also forecast that inflation will rise above 10.25 per cent in the fourth quarter of this year — the highest level since 1982.
Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
What is tokenisation?
Tokenisation refers to the issuance of a blockchain token, which represents a virtually tradable real, tangible asset. A tokenised asset is easily transferable, offers good liquidity, returns and is easily traded on the secondary markets.
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Bantamweight
Siyovush Gulmamadov (TJK) v Rey Nacionales (PHI)
Lightweight
Alexandru Chitoran (ROM) v Hussein Fakhir Abed (SYR)
Catch 74kg
Tohir Zhuraev (TJK) v Omar Hussein (JOR)
Strawweight (Female)
Weronika Zygmunt (POL) v Seo Ye-dam (KOR)
Featherweight
Kaan Ofli (TUR) v Walid Laidi (ALG)
Lightweight
Leandro Martins (BRA) v Abdulla Al Bousheiri (KUW)
Welterweight
Ahmad Labban (LEB) v Sofiane Benchohra (ALG)
Bantamweight
Jaures Dea (CAM) v Nawras Abzakh (JOR)
Lightweight
Mohammed Yahya (UAE) v Glen Ranillo (PHI)
Lightweight
Alan Omer (GER) v Aidan Aguilera (AUS)
Welterweight
Mounir Lazzez (TUN) Sasha Palatnikov (HKG)
Featherweight title bout
Romando Dy (PHI) v Lee Do-gyeom (KOR)
Kill%20Bill%20Volume%201
%3Cp%3E%3Cstrong%3EDirector%3C%2Fstrong%3E%3A%20Quentin%20Tarantino%3Cbr%3E%3Cstrong%3EStars%3C%2Fstrong%3E%3A%20Uma%20Thurman%2C%20David%20Carradine%20and%20Michael%20Madsen%3Cbr%3E%3Cstrong%3ERating%3C%2Fstrong%3E%3A%204.5%2F5%3C%2Fp%3E%0A
The National in Davos
We are bringing you the inside story from the World Economic Forum's Annual Meeting in Davos, a gathering of hundreds of world leaders, top executives and billionaires.
