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HMRC internal manual

Employment Status Manual

HM Revenue & Customs
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Agency and temporary workers: agency legislation - provisions from 6 April 2014: oil and gas sector (6 April 2014 onwards)

Applicable from 6 April 2014

Income Tax (Earnings and Pensions) Act 2003, Part 11, Chapter 3, sections 222, 689 & 689A.

Social Security (Contributions) Regulations 2001, regulation 114

From 6 April 2014, there are special rules in relation to UK Continental Shelf (UKCS) workers in the oil and gas sector to prescribe who is responsible for administering PAYE. For the purpose of these provisions, a continental shelf worker means a person in an employment the duties of which are performed:

  • in the UK sector of the continental shelf (as defined in section 41, ITEPA 2003), and 
  • in connection with exploration or exploitation activities (as so defined).

UK employers

Income tax is due on earnings of non-UK residents working on the UKCS by virtue of section 41, ITEPA 2003. General earnings in connection with the exploitation and extraction of minerals from the sub soil and sea bed are treated as general earnings in the UK. Where there is a UK employer, PAYE must be operated by that employer.

When the worker is UK resident, income tax is due on their general earnings and again where their employer is in the UK, PAYE must be operated by that employer in the same way as any other employees.

Foreign employers

From 6 April 2014, section 689A ITEPA 2003 prescribes who must operate PAYE for UKCS workers with a foreign employer.

Where there in no requirement on the employer to operate PAYE, then the relevant person who must operate PAYE is:

  • if the foreign employer has an associated company (as defined in section 449 of Corporation Tax Act 2010) with a place of business or registered office in the UK, that associated company, or 
  • in any other case, the person who holds the licence under Part 1 of the Petroleum Act 1998 in respect of the area in which the duties of the continental shelf worker’s employment are performed (subject to the voluntary arrangement as described below).

These provisions do not prevent the foreign employer administering PAYE voluntarily and will only apply when the foreign employer is not administrating PAYE in full. A certification scheme has been introduced to provide for the issue of certificates where an employer with no presence in the UK discharges filing and payment responsibilities on behalf of the oil field licensee, see ESM2054. Whilst the certificate is in place the licensee will not be held liable for any failure by the foreign employer. There are similar provisions for NICs purposes to prescribe which party is the secondary contributor for NICs. See the National Insurance Manual for details.

See also: 

  • Oil and Gas Sector- Certification Scheme, see ESM2054.