HMRC has published new Guidelines for Compliance (GfC18) addressing the VAT place of supply of services in the oil and gas sector. This is sector-specific published guidance and businesses operating in this sector should be aware of it.
The guidance covers a genuinely complex area of VAT. The VAT liability of supplies of services offshore depends on numerous factors including, but not limited to:-
- the nature of the services supplied;
- the nature of the asset (fixed to the seabed or not) to which the services relate and the location of the asset, relative to the UK territorial limit (12 nautical miles);
- the place of establishment of the customer.
Getting the place of supply wrong carries real consequences.
The guidance addresses a number of areas that regularly give rise to uncertainty:
- Land related services and how they apply to fixed production platforms
- Fixed establishment status for offshore installations, including under Joint Operating Agreement structures
- The distinction between a supply of staff and a supply of services - including where personnel are supplied through intermediaries
- Single versus multiple supplies where contracts bundle onshore and offshore elements
- Use and enjoyment rules for equipment hire and electronically supplied services used offshore
The guidance also sets out how to correct past VAT returns where errors are identified.
This is a welcome development in a sector where the VAT treatment of services has long been a source of uncertainty/difficulty. In fact, it has been over a decade since there was any direct guidance provided in the form of the North Sea Memorandum.
Businesses active in oil, gas and offshore renewable energy should review the guidance in the context of their current arrangements. HMRC have also indicated that they may produce further compliance guidance in other perceived areas of complexity for the sector.
VITA has in-house expertise across VAT in the oil, gas, and energy sectors. We would be delighted to hear from you if you have questions or concerns on the current VAT liability decision making process within your business.