Policy paper

Statement of Practice 6 (1984)

Published 31 July 1984

Statement of Practice 6 (1984)

Where mobile drilling rigs, vessels or equipment leased by a non-resident lessor are used in connection with exploration or exploitation activities carried on in the UK or in a designated area, the question of whether the profits or gains arising from the lease constitute income from such activities depends on the facts and circumstances of each particular case. However, the practice of HM Revenue and Customs is not to seek to charge such profits or gains to tax under TA 1988 section 830 if all of the following conditions are satisfied:

  1. The contract is concluded outside the UK and the designated areas.

  2. The lessor’s obligations are limited to the provision of the asset, eg, a rig on ‘bareboat’ terms, that is to say, if the lessor has not undertaken to provide any facilities, services or personnel.

  3. The lessee takes delivery of the asset outside the designated areas, and is responsible for moving it to the place where it is used, and is not restricted to using it solely in the UK or a designated area.

  4. The lessee and lessor are not connected persons, and no facilities, services or personnel related to the operation of the asset are provided by any person connected with the lessor.

Note: this statement is as it appears in IR 131 Supplement (November 2000).