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HMRC internal manual

Oil Taxation Manual

Non-Residents Working on the UK Continental Shelf: Scope of Exploration or Exploitation Activities - Interpretation of “carried on in connection with”

The phrase “carried on in connection with” which appears in CTA09\S1313, ITTOIA05\S874 and ITEPA03\S41 is not defined in the Taxes Act. The HMRC view is that the phrase must be construed in context and that on this basis it has a very wide meaning. It is regarded as covering all the diverse activities which go to make up oil exploration and production operations.

It therefore includes:

  • Activities carried on by the licensees; and
  • Activities performed by the operators, their contractors, their sub-contractors etc. and agents and other persons providing a wide range of support services.

Activities considered to be “in connection with” will include:

  • All activities relating to the carrying out of exploration or exploitation including the operation of any vessel carrying out those activities.
  • All activities related to decommissioning.
  • Activities necessary to ensure the efficient carrying out of the activities. These will include activities of meteorologists and other technical staff, medical staff and catering and cleaning staff.

Activities not caught will include:

  • Any activities which take place in the UK sector simply because that is where the personnel are based. These could include training sessions on global company policy or other activities not related to the activity being carried on in the UK sector.
  • An offshore drilling rig located in the UK sector being hired out to a TV company for use as a film location.
  • An oil construction crane barge being hired out to lift a sunken trawler from the seabed.
  • Activities where there are no personnel normally present such as the provision of vending machines or automatic cashpoints (ATMs).

A good working rule is that an activity will be regarded as being within CTA09\S1313, ITTOIA05\S874 or ITEPA03\S41 if it is related to the actual task of exploring for or exploiting gas or oil; and it is likely to be so regarded if it is an ancillary, subordinate or supporting feature of the task.

An activity is unlikely to be viewed as being within these sections if it is entirely distinct and separate from and does not support the task of oil and gas exploration or exploitation.