By Charlotte Stetzel
If a drilling contractor is non-resident in the UK, it is only subject to tax on profits or gains from ‘exploration or exploration activities’ that are defined as ‘activities carried on in connection with the exploration or exploitation of so much of the seabed and subsoil and their natural resources as is situated in the UK or a designated area’.
Most mobile rigs working on the UK Continental Shelf (UKCS) are bareboat chartered into the operating company from an overseas owner within the worldwide group resident in a low-tax jurisdiction. Traditionally, HMRC has accepted that where a rig is bareboat chartered the owner is not carrying on ‘exploration or exploration activities’ in the UK or the Continental Shelf and, therefore, the associated rental costs may be claimed as a deduction against the UK profits of that contractor.
This all changed on 5 December 2013, when the chancellor of the exchequer, George Osborne, stated that the government would ‘end the abuse of… offshore oil and gas contracting’…
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