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HMRC internal manual

Oil Taxation Manual

Non-residents working on the UK continental shelf: exemption for licensee from recovery of tax - general background

Because of practical difficulties in collecting tax from non-residents without a permanent establishment in the United Kingdom, provision is made in TMA70\S77C for tax assessed on a non-resident to be collected, in default, from the licensee with whose exploration and exploitation the non-resident’s activities are connected.

A licensee may seek to protect its position, and limit its exposure to such tax, by imposing contractual terms on its contractors which:

  • require the non-resident contractor or sub-contractor to provide a satisfactory indemnity which would enable the licensee to recover tax from the contractor or sub-contractor in the event that the licensee is required to account for the tax, or
  • require the non-resident contractor or sub-contractor to obtain an exemption certificate (see OT45550)
  • provide for the licensee to withhold tax at the current rate of Corporation Tax when making payments to the contractor in the absence of an exemption certificate

It is also possible that a licensee may decline to give work to a non-resident who cannot obtain an exemption certificate.