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HMRC internal manual

Oil Taxation Manual

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Non-Residents Working on the UK Continental Shelf: Double Taxation Agreements - Long term offshore construction type work - Is there a construction project lasting more than a given number of months?

The second question which arises from the example referred to at OT41640 is whether the provisions of the Article of the relevant Double Taxation Treaty apply since “a building site or construction or installation project may constitutes a permanent establishment only if it lasts for more than a given number of months”. This paragraph has two functions:

  • to provide a further example of what constitutes a permanent establishment and
  • to specifically exclude from the permanent establishment category certain activities etc. which would otherwise fall within the permanent establishment definition in Article 5(1). The implication is that were it not for this exclusion a place (say a workshop) used in connection with the site or project for less than the given number of months might otherwise rank as a permanent establishment.

Consequently if the non-resident company had a building site or construction or installation project in the UK:

  • If it lasted for more than the given number of months, it would rank as a permanent establishment.
  • If it did not last for more than the given number of months, it would not rank as a permanent establishment (irrespective of whether it would otherwise be considered a permanent establishment under Article 5(1) [see above)].

The OECD Commentary on Article 5(3) indicates how the duration of a construction project etc. should be measured (usually from the date on which the non-resident company began work on the project in the UK to the date on which the company completed or abandoned work in the UK). It also emphasises that seasonal or other temporary interruptions should be included in determining the duration and it is immaterial whether work was continuously re- located since “the activities performed at each particular spot are part of a single project and that project must be regarded as a permanent establishment if, as a whole, it lasts more than a given number of months”.

If a non-resident company carried on a construction or installation project and it would therefore be necessary to obtain information to determine the duration and decide the permanent establishment issue on whether or not the project lasted for more than the given number of months.