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HMRC internal manual

Oil Taxation Manual

Non-Residents Working on the UK Continental Shelf: Introduction - Interaction with Double Taxation Agreements and other legislation

Double Taxation Agreements

The UK domestic legislation described at OT40100 would be overridden by a Double Taxation Agreement. Ordinarily such treaties will have a standard provision that an enterprise of the partner country is not taxable on profits in the UK unless they are made through a permanent establishment in the UK.

The definition of the “United Kingdom” in the relevant treaty is therefore important. Some older treaties have a definition that is restricted to the land areas and territorial sea of the UK. If there were no actual permanent establishment situated in the UK (see INTM266040), as defined in the treaty, then the non-resident would be protected by the treaty so that it would not be liable to tax under CTA09\S1313, ITTOIA05\S874 or ITEPA03\S41.

Most treaties, however, have a definition of the UK that includes the continental shelf of the UK. Some of these treaties also deem an enterprise to be carrying on business through a permanent establishment in the UK if its activities are in connection with exploration or exploitation of UK oil and gas. Thus the non-resident who has activities which constitute a deemed permanent establishment on the UK Continental Shelf remains liable to tax under CTA09\S1313, ITTOIA05\S874 or ITEPA03\S41.

For a more detailed explanation of the impact of Double Taxation Agreements, see OT41500+.

Interaction with other legislation

Other provisions may impinge on the computation of profits and charge to tax under the terms of CTA09\S1313, ITTOIA05\S874 and ITEPA03\S41 but since these were usually enacted with other circumstances in mind their application is not always straightforward. The precise facts and circumstances will need to be considered to come to a solution within the scope of HMRC’s discretion of ‘collection and management’.