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HMRC internal manual

Oil Taxation Manual

HM Revenue & Customs
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Non-Residents Working on the UK Continental Shelf: Scope of Exploration or Exploitation Activities - Independent Contractor Status

A non-resident company may argue that it is not within the scope of the charge under CTA09\S1313 when personnel working in the UK Continental Shelf are carrying on activities on behalf of a UK customer, particularly when the customer retains a broad general power of supervision and control over the work so as to ensure satisfactory performance. The non- resident company may suggest that it is the customer who is carrying on the activities in the UKCS and not the contractor. Such a suggestion would not normally be accepted by HMRC.

If the contract provided that the non-resident company was to supply technical services and the necessary competent personnel to perform those services, then HMRC would normally consider that the non-resident company was carrying on an enterprise through a Permanent Establishment in the UK.

If the contract was one which appeared to be solely for the supply of personnel it would be necessary to look at the precise duties and responsibilities of those individuals. If they have wide responsibilities including for example participation in decisions on the extent and nature of their work, then the activities of the non-resident company might be said to go beyond the mere hiring out of employees and to constitute an entrepreneurial activity.

This follows Paragraph 10 of the OECD Commentary on Article 5 of the Model Tax Convention . This says that the business of an enterprise is carried on mainly by the entrepreneur or persons who are in a paid-employment relationship with the enterprise (personnel). This personnel includes employees and other persons receiving instructions from the enterprise (e.g. dependent agents). The powers of such personnel in its relationship with third parties are irrelevant.

Where the employees of the non-resident company have these wider responsibilities then HMRC would normally contend that the non-resident company was also carrying on an enterprise in the United Kingdom.