Shell recorded a significant increase in profit last year, reaching $9.5 billion globally between July and September.

At the time, Shell claimed that because it had made significant investments in the UK, it had not generated a profit there and was not subject to taxation.

However, the business acknowledged on Friday that it does anticipate paying some tax in the UK for the first time since 2017.

It comes after the government raised the Energy Profits Levy, sometimes known as the windfall tax, from 25% to 35% in November. This tax is levied on profits made from the extraction of UK oil and gas.

Shell did not specify how the $2 billion reduction to its 2022 fourth-quarter earnings would be distributed between the UK and the EU.

After the Covid lockdowns ended, oil and gas prices started to rise, but they really took off after Russia invaded Ukraine. As a result, energy firms like Shell and BP made huge profits in 2022.

In response to pressure from consumers facing skyrocketing energy costs, the government enacted a windfall tax on corporate profits to help pay for a plan to cap gas and electricity prices.

Companies that operate in the North Sea’s oil and gas industry are taxed differently than other businesses.

They pay a combined rate of 30% corporate tax and an additional 10% rate on their profits. They now pay the windfall tax on top of that, bringing their overall tax rate to 75%.

There have, however, been worries that the policy has shortcomings.

By accounting for losses or spending money on things like decommissioning North Sea oil facilities, businesses have been able to lower the amount of tax they pay. It has resulted in businesses like BP and Shell paying little to no tax in the UK in recent years.

Another provision of the Energy Profits Levy enables energy corporations to apply for tax breaks worth 91p of every £1 invested in UK fossil fuel extraction.