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HMRC internal manual

Tonnage Tax Manual

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Offshore activities: Meaning of ‘offshore activities’

‘Offshore activities’ are defined in FA00/SCH22/PARA104 (1) as:

‘activities in connection with the exploration or exploitation of so much of the seabed or subsoil or their natural resources as is situated in the UK sector of the continental shelf.’

In applying this definition it is the location of the resources that matters and not the location of the activities.  For example, laying or repairing a pipeline from an oil or gas field in the Norwegian sector of the North Sea will not fall within the definition, even if that section of pipeline were in the UK sector.

Equally, laying or repairing a pipeline from an oil or gas field in the UK sector of the North Sea would fall within the definition, even if that section of pipeline were in the Norwegian sector.  However the way the oil & gas industry is structured in the UK it is envisaged that for the vast majority of ships both the location of the activities and the resources will be in the UK sector.

‘UK sector of the continental shelf’’ (UKCS) is explicitly defined in paragraph 104(2):

‘Any area designated by Order in Council under section 1(7) of the Continental Shelf Act 1964, and any waters within the seaward limits of the territorial sea of the United Kingdom.’

Whether or not ‘the seabed or subsoil or their natural resources’ are within the UK sector of the continental shelf will be a question of fact, and the answer will be self evident in most cases.  Officers should submit any difficult or doubtful cases to the Tonnage Tax Technical Adviser

Exploration or exploitation activities

Qualifying ships engaged in the search for oil or gas on the UK continental shelf (e.g. a seismic vessel) would fall within the description of ‘exploration activities’ and similarly qualifying ships engaged in the exploitation of UKCS oil or gas (e.g. a pipe-laying vessel) would fall within the description of ‘exploitation activities’.

‘In connection with’ widely drawn

However ‘offshore activities’ is much wider than ‘exploration or exploitation activities’, because of the words ‘in connection with’, and covers all types of ships used in the actual task of exploring for or exploiting oil or gas either in an ancillary, subordinate, or supporting role (e.g. a diving support vessel).

See TTM11110 below for pre 2005 examples of the types of vessels to which the special rules apply.  Officers should submit any difficult or doubtful cases Tonnage Tax Technical Adviser.

References

FA00/SCH22/PARA104 (meaning of ‘offshore activities’) TTM17596
   
Contact points TTM01120
FA05/SCH7/PARA15 (meaning of ‘offshore activities’) TTM20017