If you are considering moving into work as an offshore contractor in the oil and gas industry, it’s important that you have all the facts when it comes to your tax obligations.
Here at One Two One Accountants, we know that tax affairs which stretch across international borders can be incredibly complex, and we have a great deal of experience in assisting offshore contractors to ensure tax compliance and efficiency.
That’s why we have put together this short, simple guide to everything you need to know about tax as an offshore contractor. So, let’s dive straight in!
Considering work as an offshore contractor in oil and gas?
According to figures from the Oil & Gas UK Workforce Report, there are expected to be around 213,000 individuals working offshore in the UK during 2023.
Working offshore isn’t simply a career choice, it is a lifestyle choice, and it certainly isn’t suited to just anyone. However, whilst the challenges can be large, so too can the payoffs. It isn’t surprising, therefore, that the oil and gas industries attract thousands of eager workers each year who are looking for an exciting challenge and an unorthodox lifestyle.
What does it mean to work ‘offshore’ from a tax perspective?
When it comes to UK taxation, UK territory is designated as England, Wales, Scotland, Northern Ireland and the Continental Shelf.
The Continental Shelf covers UK territorial waters, to a distance of twelve nautical miles from the coast, along with certain ‘designated areas’ of the surrounding waters.
These designated areas are the UK sectors oil and gas exploration and exploitation areas, and individuals working in these designated areas are what we know as ‘offshore’ workers. For such workers, particular rules apply when it comes to tax and NICs regulations.
What are the tax rules for offshore contractors?
Common-or-garden tax matters can certainly be complicated enough, never mind when tax affairs begin to cross international borders.
Unfortunately, incorrect submissions can lead to substantial penalties, which have become a greater risk since major changes were introduced to offshore taxation rules several years ago.
The tax and National Insurance rules for offshore oil and gas workers are fairly complicated, and vary depending on if you:
Work for a UK company
Work within UK waters
Are a foreign or UK national
Work in a country that holds a Double Taxation Agreement with the UK (DTA)
I’m a UK resident. What are my tax obligations?
If you are a UK resident working offshore in the UK sector of the Continental Shelf, you are liable to pay UK tax, along with National Insurance.
I’m a non-resident worker, what about me?
If you are registered as a resident in a country holding a DTA with the UK, you must check your country’s treaty for the specific terms of the agreement.
The vast majority of DTA’s include the designated UK sector of the Continental Shelf in their definition of the UK. However, some do not, and in these instances, a contractor is not regarded as working within the UK.
Different DTA’s will outline different criteria for taxation. Many will exempt you from UK tax if you are contracted by an employer-based abroad and you are outside of the UK for a certain length of time. Other DTA’s will regard you as a UK resident for taxation purposes if you work within the UK sector of the Continental Shelf.
You may have to pay UK National Insurance depending on a number of factors, such as whether any Social Security agreement exists between the UK and the country you are resident in.
Still feeling unsure about your tax obligations?
If this is all going over your head, there’s no need to worry. We’re here to help.
In most cases, getting the right advice as an offshore contractor is crucial in order to ensure compliance and maximise tax efficiency. Working closely with a professional can provide you with the valuable clarity that you need.
Here at One Two One, our specialist accountants can utilise their extensive knowledge and experience to assist you with your tax compliance as an offshore contractor in the oil and gas industries.
Looking for professional guidance? Contact us today to get the ball rolling.