North Sea Oil Fields Diver Must Pay Income Tax, Tribunal Rules

Non-British residents are generally only liable to Income Tax on sums earned within the UK. However, as a decision of the First-tier Tribunal (FTT) showed, special rules apply to those who are engaged in the offshore oil industry, even if they work outside UK territorial waters.

The case concerned a diver who worked on the decommissioning of a large vessel which had been used to service North Sea oilfields that lay outside the 12-nautical-mile limit of UK waters. Although he was an Irish national who had been employed by an overseas company, HMRC took the view that more than £90,000 which he had earned whilst working on the project was subject to Income Tax.

In rejecting the diver’s challenge to that decision, the FTT noted that the UK is a signatory to the 1958 United Nations Convention on the Continental Shelf, which confers on coastal states exclusive sovereign rights for the purposes of exploring and exploiting the natural resources of those parts of the continental shelf that are adjacent to them.

By Section 41 of the Income Tax (Earnings and Pensions) Act 2003, remuneration earned in connection with exploration and exploitation activities within the UK sector of the continental shelf is to be treated as having been earned within the UK. The diver’s plea that he had been engaged solely in decommissioning work, unconnected to the exploration or exploitation of natural resources, fell on fallow ground.