What is a windfall tax?

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Energy companies may face unexpected tax breaks after reporting bumper profits during a cost of living crisis.

Campaigners, politicians and charities are among those calling for suppliers to charge extra as families struggle to make their payments bill

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Gas and oil companies could pay more if unexpected tax is introducedcredit: getty

The idea has been suggested as household energy bills have soared and the government prepares to announce the measure. Fund a new package of support for hard-to-reach families.

energy price cap jumped in April, adding about £700 to the average gas and electricity bill and Taking it up to £1,971 a year.

Ofgem expects it to be another £800. will increase to In October this year, further strain on domestic finances.

This would take the typical dual fuel bill up to £2,800 per year, although customer bills can be higher or lower depending on usage.

Meanwhile, suppliers have posted an increase in profits this year due to the rise in gas and oil prices.

oysters A record £7bn was raised in the first three months of 2022 and BP earned £5bn, its biggest profit in the last 10 years.

An unexpected tax would make energy suppliers pay more money, which could theoretically be used to help families struggling with their bills.

We explain what it is and whether it will be offered to anyone.

What is windfall tax?

Windfall tax is a one-time levy imposed by the government on companies.

It is designed to make firms pay more tax if they have profited from something for which they were not responsible.

For example, in this case, it would target energy supplier Those who have registered sky-high profits.

companies have benefited Bulk gas and oil prices riseThe pandemic in Ukraine and the post-Russian war pushed up demand.

it has pushed energy bill Also increased the income for the customers and the supplier.

It’s not clear how any future windfall gains will work out on energy companies.

Labor The party has repeatedly called on companies to tax their excess profits – along with the cash-back pump to help. low bill,

It suggested a 10 percentage point increase on corporation tax, which it said would raise £1.2 billion. BBC informed of.

Windfall tax has been used before in the UK.

In 1997, the Labor government imposed additional tariffs on firms including BT and Scottish Power.

The then chancellor, Gordon Brown, claimed that the firms were sold for too little when privatized by the Conservatives.

Will the government bring windfall tax?

The government has not confirmed whether it will introduce an unexpected tax.

The prime minister has previously ruled out an additional tax, saying it would put jobs at risk and stifle investment.

But the chancellor, Rishi Sunak, has warned the North Sea oil and gas giants that they could face levies unless they invest more in UK energy.

Mr. Sunak recently said that “Nothing is ever off the table”,

“If we don’t see that type of investment going forward, and if companies aren’t going to invest in our country and in our energy security, of course, I’m going to do something,” the chancellor told Mumsnet in a recent interview. I’ll do that and look at it.”

BP has vowed to invest with or without the additional tax bill.

But Centrica likens any tax to “burning furniture to keep it warm.”

A government source told The Sun: “We want more ambitious plans, faster.”

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