Promotional material

Help with VAT place of supply of services in the oil and gas sector – GfC18

Published 25 March 2026

Purpose and scope

These guidelines:

• are for VAT registered businesses in the oil and gas sector, and may also be helpful to businesses operating in wind, carbon capture and storage

• explain HMRC’s recommended approach to deciding the place of supply of services in this sector

Suppliers are responsible for applying the correct VAT treatment to their supplies. In the oil and gas sector, we encourage suppliers to consider these guidelines and to work with their customers to agree the right approach if they are unsure.

Background

In the oil and gas industry, offshore installations are platforms or rigs used in the exploration and production of carbon-based products in a specific area.

This area is usually licensed to several companies. The way they operate can vary, but a common arrangement is a consortium (group) of companies under a Joint Operating Agreement (JOA). This includes an Operating Member (OM) and other Participating Members (PMs).

A JOA details:

• how costs and risks are shared

• the name of the operator responsible for managing operations

• the rights and obligations of the other PMs

• decision-making, cost contributions and entitlement to production

The OM, usually the company with the largest percentage interest in the field, is responsible for buying in the goods or services and recharges a percentage of those costs to PMs based on their share ownership of the licensed area. Products generated from the area are also shared between the OM and PMs based on their interest.

Examples of other arrangements in the sector

Joint ventures

Agreements where 2 or more parties work together on an oil and gas project under joint control. Each party contributes resources, shares risks and costs, and receives benefits in proportion to their agreed share. A joint venture can be incorporated or unincorporated, with governance and operational responsibilities set out in the agreement.

Read more about the:

• principles of joint ventures

• joint venture entity to be registered

• issues to consider

Licensing and concession agreements

Legal arrangements where a government grants a company the right to explore, develop and produce petroleum in a defined area, under agreed fiscal and regulatory terms.

Production sharing agreements (PSAs)

Contracts between a government, often through its national oil company, and one or more international oil companies. The designated operator funds and carries out operations and recovers costs through a share of production (cost oil). The remaining production (profit oil) is divided between the parties under the terms of agreement.

Service contracts

Agreements where an international oil company provides expertise, funding and operational services to a government or national oil company. The international oil company is paid fees and recovers costs but does not own the resources, so the government keeps full control.

Farm-in and farm-out agreements

Contracts that allow a company to acquire (for example, by performing certain exploration or development activities) or transfer an interest in an existing oil and gas licence. These agreements are often used to manage financial exposure or share risk during exploration.

Recommended approach

You should check the type of supply and then follow these 4 steps to decide the place of supply of services.

1. Check if any special rules apply, such as when the service relates to land or is used and enjoyed in a specific location. Read the section Special rules that take priority when determining the place of supply.

2. If no special rules apply, read the General rule section to determine the place of supply.

3. Check if there is a fixed establishment that is more closely linked to the supply. Read the section Fixed establishment — offshore location.

4. Check if there are specific issues that may affect the VAT treatment. Read the Other factors that may affect the VAT treatment section.

If after following these 4 steps you’re still unclear where the place of supply is, you should read the section Further advice where the place of supply is unclear in Next steps.

Special rules that take priority when determining the place of supply

When working out the place of supply of services, there are special rules for certain services. These are known as exceptions, and they take priority over the general place of supply rules to make sure the VAT treatment reflects where the service is actually performed or consumed.

These guidelines do not explain every special rule. They focus on those most relevant to the oil and gas sector.

Land related services

Where services directly relate to land, the place of supply of those services will be where the land is located and the general place of supply rules do not apply.

A service counts as land related only if the land is a central and essential part of the service.

For the purposes of this rule ‘land’ includes both the land itself, and any physical structure built on the land, such as fixed production platforms. Read more about the meaning of land.

In deciding whether different types of installations are land for the purposes of these rules, consideration must be given to the necessary features. These include whether the installation is attached to the seabed, for example connection via pipes compared to anchoring.

Mobile installations and installations that are merely anchored are less likely to be viewed as land.

Services that are directly related to the fixed production platform may be land related. Where that fixed production platform is located outside of the UK 12 nautical mile limit, the supplies are outside the scope of UK VAT.

Services that are particularly relevant include:

• surveying and assessing property

• seismic surveying (a non-invasive geophysical technique that uses artificial, sound-generated shock waves to image the Earth’s subsurface) and associated data processing services — such as processing, interpretating and modelling raw data

• construction or demolition of a building or permanent structure

• maintenance, renovation and repair of a building or permanent structure

HMRC considers surveying a platform or the land it is fixed on, and analysing that data, to be land-related services. For example, this includes surveys to test the viability of drilling operations.

Geological surveying of the seabed and associated data processing relating to a specific area of land would also be considered land related services.

Services must directly relate to the land and cannot be indirectly related. For example, general data analysis that does not relate to a specific piece of land is not land related.

Construction, demolition, maintenance, renovation and repair of fixed production platforms are also considered land related services.

Other specific services that may be considered land related, when supplied to or for an offshore installation include (list is not exhaustive):

• installing scaffolding or specialist access systems

• installing temporary sheeting, encapsulation or weather protection

• erecting, modifying or removing temporary access

• high pressure jetting services to clean vessel internals, pipework or steelwork

• maintenance to survey, inspect, review and remediate equipment such as pipework, risers, pressure vessels and tanks

• surface preparation and protective coating on pipework, pipe welds and pressure equipment operating at ambient and high temperature

• surface preparation and protective coating of structures, internal vessels or tanks, tertiary equipment and bolting

Read more information about land related services in Place of supply of services (VAT Notice 741A) and examples of land related services.

Use and enjoyment rules

The use and enjoyment rules are special rules that overrides the general rule and other special rules. They apply to certain services where the place of supply depends on where the service is actually used and enjoyed.

These rules are designed to prevent VAT distortion where the contractual place of supply does not reflect the location of actual consumption.

The rules apply to:

• telecommunications services

• electronically supplied services

• insurance repair services

• hiring of goods

• hiring of means of transport

• broadcasting services

Where these rules apply, the place of supply is the place where the service is actually used and enjoyed, rather than the place determined under the general or other special rules. This means:

• the place of supply is in the UK if the service is used in the UK but would otherwise be taxable outside the UK

• the place of supply is outside the UK if the service would ordinarily be taxable in the UK but the service is actually used outside the UK

Offshore installations

The use and enjoyment rules may be relevant to offshore installations for:

• hiring of equipment (such as bins or specialist tools) for use on offshore installations

• software services used directly on offshore platforms (covered by the rules for electronically supplied services)

• data services provided to offshore teams (covered by the rules for electronically supplied services)

For example, if a UK supplier hires equipment to a UK customer, but the equipment is used exclusively on an installation located outside the UK 12 nautical mile limit, the supply may be outside the scope of UK VAT under the use and enjoyment rules.

More information about the use and enjoyment rules

Use and enjoyment rules also require you to consider that:

• the supplier must be able to demonstrate that the equipment or service is used offshore

• proof of export is not required for services, but evidence of offshore use is recommended to support outside the scope treatment

• where equipment is used both onshore and offshore, VAT may need to be apportioned

Read more about use and enjoyment rules in Place of supply of services (VAT Notice 741A) and introduction to use and enjoyment.

Some services may come under more than one exception, such as those that could be land related or used and enjoyed offshore.

General rule

Where supplies are not covered by the special rules, the general rule applies.

For ‘Business to Business’ (B2B) supplies of services, the general rule is that the place of supply is where the customer belongs.

The rules are different for supplies to non-business customers, such as private individuals, charities and government departments. These are not covered in these guidelines. Read more information about these rules in Place of supply of services (VAT Notice 741A).

A business ‘belongs’ where it has its business establishment, or some other fixed establishment. Usually, a supply is treated as made to the business establishment, likely to be the principal place of business such as the head office, unless that gives an irrational result. Read more information about the irrationality test.

If a customer has multiple establishments, including fixed establishments, the services are treated as made to the establishment that is more closely connected to the supply. This also applies where use of the business establishment produces an irrational result.

Fixed establishment — offshore locations

You’ll need to check if a business has a fixed establishment.

To decide if there is a fixed establishment more closely related to the supply, first check whether any fixed establishments exist.

In the oil and gas sector, offshore installations may qualify as fixed establishments. The 2 most common types are:

• fixed platforms — permanent structures anchored to the seabed, used for drilling, production, and housing personnel

• Floating Production, Storage, and Offloading (FPSO) and Floating-Point Unit (FPU) — floating vessels that process and store hydrocarbons, often moored but not permanently fixed

Features of a fixed establishment

The term ‘fixed establishment’ is not defined in law. The main point to consider is whether the establishment has the permanent presence of both the human and technical resources required to make or receive supplies from that location in its own right.

There is no single test when considering whether a fixed establishment is an appropriate alternative to the head office for place of supply purposes. All facts must be considered and no one factor is necessarily decisive. Relevant factors may include:

• how the services are provided

• the significance of activities at each establishment

• where the necessary human and technical resources are permanently based

• which establishment appears on contracts and invoices

• whether attributing the supply to that establishment produces a rational VAT outcome

Operating and participating members

For offshore installations where supplies are made to the OM of a field, who then makes onward supplies to PMs, the installations are likely to be treated as a fixed establishment of the OM. This would be the case where the installation has the permanent presence of both the human and technical resources required to make or receive supplies from that location in its own right.

These offshore installations are unlikely to be fixed establishments for PMs or other entities linked to the platform. This is because they usually do not meet the conditions, such as having:

• a permanent presence on the installation

• both the people and technical resources needed to make and receive supplies in their own right

Other arrangements that do not follow the OM and PM model may meet the requirement. This depends on the nature of the arrangement and whether the installation involved has the necessary features to be a fixed establishment.

Establishment most closely related to the supply

Once you identify all relevant establishments, including fixed establishments, you must decide which one is most closely related to the supply in question.

This will depend on the particular facts and the supplies being made. When deciding if alternatives to the head office are the establishment most directly concerned with the supplies, read about relevant factors that should be considered.

Territorial limits

Supplies made to these offshore installations may be outside the scope of UK VAT if they are:

• considered to be fixed establishments

• located outside the UK’s territorial waters

For VAT, UK territory includes up to the 12 nautical mile limit. Outside this limit is considered outside the UK. Find out more about the territory of the UK for VAT purposes.

Example of establishment most closely related to the supply

If you supply information directly to the platform, the establishment most closely connected to the supply would be the platform as long as the platform was a fixed establishment for the business receiving the information. If the platform is located outside the 12 nautical mile limit, the place of supply would be outside the UK.

Good practice and supporting evidence

It is not sufficient to use the non-UK address of the company that you are supplying as evidence that the supply is outside the scope of UK VAT. It is good practice to get confirmation from the recipient of the supply whether the offshore installation is a fixed establishment and confirm that the supply is being made to that fixed establishment, before treating the supply as outside the scope of UK VAT.

Before you make any decision as to which establishment is most closely connected with the supply, you need to gather appropriate evidence.

If you are making supplies to an offshore installation outside the 12 nautical mile limit, you should check that all requirements are met before treating your supplies as outside the scope of UK VAT.

Other factors that may affect the VAT treatment

Services or personnel

In the oil and gas sector, businesses commonly supply or receive personnel to carry out work on, or in support of, offshore production activities.

To decide which establishment a supply is made to, and which VAT place of supply rule applies, you must first identify the nature of the supply. You need to examine the specific contracts and the practical arrangements.

If you supply a service that is directly connected with a fixed production platform, this may be a land‑related service. This includes repairing or maintaining equipment that is physically installed on the platform and forms part of the immovable property.

However, supplies in the sector may involve supplying personnel rather than carrying out a specific land‑related task. For example, a business may supply skilled technicians or engineers so that the customer can use them as needed.

In these cases, the supplier is not responsible for carrying out a particular job on the platform. Instead, it makes a supply of staff. The customer decides how, when and where the individuals are used. This type of supply is not land related and falls under the general B2B place of supply rule.

The same applies where personnel are supplied through intermediaries, including personal service companies (PSCs). For example, an engineer may work through their own PSC, which contracts with a recruitment agency. The recruitment agency then supplies the engineer’s services to an oil and gas operator.

Although the engineer carries out work on an offshore installation, the contractual supply made by the recruitment agency is a supply of staff to the operator. The operator controls how the individual is deployed, and the recruitment agency does not supply a land‑related service. The general B2B place of supply rule therefore applies.

Read more about VAT supplies of staff and identifying a supply of staff.

Single or multiple supplies

When deciding the correct VAT treatment of services, including the place of supply, it is important to consider whether the supply is a single composite supply or a multiple supply made up of distinct elements. This can affect which place of supply rule applies and whether UK VAT is chargeable.

UK VAT legislation does not define single or multiple supplies. HMRC’s approach is based on case law such as Card Protection Plan (349/96) and Levob Verzekeringen BV (C-41/04). The principle is that each supply of a service must be regarded as distinct and independent unless the circumstances show that the elements combine to form a single supply.

You should consider the facts of each case, and it is particularly important to consider the artificiality and economic reality of the arrangements. It is also important to consider the customer’s perspective including whether the elements are:

• so closely linked that they form a single indivisible supply

• separate, retaining independent value and purpose and may form a multiple supply

Single supply 

A single supply exists where: 

• there is one principal element 

• any other elements are ancillary, and are not an aim in themselves but a means of better enjoying the principal service

• two or more elements are so closely linked that they form a single, indivisible economic supply, and it would be artificial to split them for VAT purposes 

In these cases, the VAT treatment follows the principal supply.

Multiple supply 

A multiple supply exists where each element:

• is distinct and independent

• could be supplied separately and is not just a way to enjoy one element more than another

In these cases, each element must be considered separately for VAT purposes.

In the oil and gas sector, it is common for services to be bundled together.

Single or multiple supply example

A supplier provides offshore maintenance services (potentially land related or supplied to a fixed establishment outside the UK), alongside onshore planning or support. They have a contract that includes equipment hire and consultancy services, some of which are performed onshore and some offshore.

If the offshore element is the principal supply, and the onshore elements are ancillary, the place of supply may be determined by reference to the offshore location. This means it could be outside the scope of UK VAT if the offshore installation is beyond the 12 nautical mile limit.

If the onshore elements are substantial and independent, they may need to be treated as separate supplies, with UK VAT applying to those onshore elements.

Suppliers should assess the nature and purpose of each element of the supply and for:

• a single supply, the place of supply rules should reflect the principal component of the supply

• multiple supplies, apply the appropriate place of supply rules to each element

Work on goods

In the oil and gas sector it is common to supply or receive services for repairing, maintaining, valuing or processing moveable goods. There are no special rules which cover work on goods supplied B2B. The place of supply follows the general rule and is where the customer belongs.

This work on goods often takes place onshore, even if the goods relate to an offshore installation. For example, pumps which are removed from the offshore installation, repaired in the UK and then sent back offshore.

When deciding the place of supply, it is important to consider which establishment is most closely related to the supply. If the work relates to moveable goods used exclusively on an offshore installation that is a fixed establishment of the recipient, the place of supply is likely to be the fixed establishment as most closely related to the supply. This can apply even if the work on the goods, such as repairs, takes place onshore.

Next steps

Correcting a VAT return

To correct a submitted VAT return, you’ll need to read the section correcting VAT errors on a return already submitted in how to correct VAT errors and make adjustments or claims (VAT Notice 700/45).

When correcting a VAT return because of the information in these guidelines, you should enter the reference number ‘GfC18’ in the ‘reason for error’ box.

Where customers fail to meet their obligations, they may be subject to:

• penalties

• interest

• both

If you think you may have failed to meet your obligations, read the HMRC compliance checks factsheets on penalties to find out about:

• penalties HMRC could use

• when these penalties may apply

Further questions

If you have any further questions after reading these Guidelines for Compliance you can contact us by email: ccgguidelinesforcompliance@hmrc.gov.uk.

You should include the Guidelines for Compliance reference number ‘GfC18’ in the subject line. If you have a Customer Compliance Manager (CCM) you should copy them into the email.

Sending information by email carries certain risks. HMRC will assume that by sending information by email you understand and accept these risks.

Give feedback about these guidelines

We are interested in other areas of complexity for businesses operating in this sector. If you have examples that could be included in future guidelines, please contact us by email: ccgguidelinesforcompliance@hmrc.gov.uk.

Further advice where the place of supply is unclear

You can use HMRC’s Non‑Statutory Clearance Service to ask for advice where the place of supply of services is unclear and the supplier and recipient cannot agree.

Before applying, you must have considered these guidelines, the relevant legislation, HMRC guidance and VAT Notices.

You should only apply if you are uncertain how the law applies to your specific circumstances.

Find out how to apply and what information you need to give in Find out about the Non‑Statutory Clearance Service.

Legislation and guidance

The most relevant legislation in the VAT Act 1994 is:

Section 7A place of supply of services

Section 8 reverse charge on supplies received from abroad

Section 9 place where supplier or recipient of services belongs

Schedule 4a — place of supply of services: special rules

The main sources of available guidance include:

HMRC’s manual VAT Place of Supply of Services

Place of supply of services (VAT Notice 741A)