HMRC issues new compliance guidelines for Energy Sector

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. Offshore installations can sit across different VAT regimes depending on their location relative to the UK 12 nautical mile limit, and the nature of the services being supplied. 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 difficulty. Businesses active in oil, gas and energy should review the guidance in the context of their current arrangements.

VITA has in-house expertise across VAT in the oil, gas and energy sectors, and we would be delighted to hear from you if you have questions.