HMRC internal manual

Oil Taxation Manual

Non-Residents Working on the UK Continental Shelf: Double Taxation Agreements - Long term offshore construction type work - An example

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A Portuguese pipe laying company in the autumn of year 1 contracts with an oil company to lay a pipeline on the UK Continental Shelf. This is a lump sum fixed price contract and engineering and planning work is undertaken at the start of year 2 in Portugal. On the 1st of March of that year the contractor carries out a survey on the UK Continental Shelf along the proposed pipeline route to determine the seabed profile and any potential obstructions. The next few months are taken up with procurement of the materials including the pipeline and installation by the contractor’s pipe laying vessel does not get underway until 1st of July in year 2. Although it was envisaged that the installation would only take 4 months the pipe laying vessel could not complete the work in year 2 due to difficult weather conditions in the North Sea and had to demobilise back to Portugal in late September. The installation was not completed by the pipe laying vessel until late March of year 3, including trenching & tie-in to the oil platform, and the pipeline was not handed over to the oil company until 1st of April in year 3 after pigging & testing was completed.

For the purposes of Article 5(1)(g) in the UK/Portugal treaty this would constitute an actual Permanent Establishment in the UK as the project work lasted for more than 12 months - from the start of the survey activity on 1st of March in year 2 until the pipeline was completed on 1st of April in year 3 some 13 months later.