In HMRC v M F Fowler [2017] UKUT 219 (30 May 2017), the UT found that, despite the deeming provision contained in ITTOIA 2005 s 15, the income of a professional diver was taxable as employment income.
Mr Fowler was a qualified diver, resident in South Africa, who had undertaken diving engagements in UK continental shelf waters. HMRC sought to tax Mr Fowler on the income from his diving activities on the basis that it represented income from employment (UK/South Africa double tax treaty art 14) and not business profits (art 7).
Under ITTOIA 2005 s 15, the performance of duties of employment consisting in seabed diving activities is treated as the carrying on of a trade. Mr Fowler’s primary contention was that he was self-employed and so exempt from tax. His alternative case was that the effect of s 15 was to bring his income within the double tax treaty art 7, even if that income was otherwise from employment within art 14. This was the preliminary issue the UT had to decide, on the assumption that Mr Fowler was employed.
The UT observed that the contention advanced on behalf of Mr Fowler was that the nexus between ‘employment’ and ‘employment income’ was so close that the two terms had to be read together, and together had to supply the meaning of the term ‘an employment’ in art 14. But the tribunal preferred HMRC’s approach, finding that the term defining art 14 was the term ‘employment’ rather than ‘salaries, wages…’ for two reasons. Firstly, the taxing right was allocated according to where the employee was resident and where the employment was exercised; the fruits of that employment played no role in delimiting the scope of art 14. Secondly, the catch all of ‘other similar remuneration’ was intended to ensure that all fruits derived from employment were captured.
The UT concluded that it should construe the term ‘employment’ under English law without regard to s 15.
Why it matters: Having found that ITTOIA 2005 s 15, ‘which might be said to be a “deeming” provision’, fell away, the UT added: ‘I do not necessarily consider that more narrowly drawn “deeming” provisions … would be incapable of supplying … the meaning of “employment” for the purposes of Article 14 …It is simply that this case does not arise here.’
In HMRC v M F Fowler [2017] UKUT 219 (30 May 2017), the UT found that, despite the deeming provision contained in ITTOIA 2005 s 15, the income of a professional diver was taxable as employment income.
Mr Fowler was a qualified diver, resident in South Africa, who had undertaken diving engagements in UK continental shelf waters. HMRC sought to tax Mr Fowler on the income from his diving activities on the basis that it represented income from employment (UK/South Africa double tax treaty art 14) and not business profits (art 7).
Under ITTOIA 2005 s 15, the performance of duties of employment consisting in seabed diving activities is treated as the carrying on of a trade. Mr Fowler’s primary contention was that he was self-employed and so exempt from tax. His alternative case was that the effect of s 15 was to bring his income within the double tax treaty art 7, even if that income was otherwise from employment within art 14. This was the preliminary issue the UT had to decide, on the assumption that Mr Fowler was employed.
The UT observed that the contention advanced on behalf of Mr Fowler was that the nexus between ‘employment’ and ‘employment income’ was so close that the two terms had to be read together, and together had to supply the meaning of the term ‘an employment’ in art 14. But the tribunal preferred HMRC’s approach, finding that the term defining art 14 was the term ‘employment’ rather than ‘salaries, wages…’ for two reasons. Firstly, the taxing right was allocated according to where the employee was resident and where the employment was exercised; the fruits of that employment played no role in delimiting the scope of art 14. Secondly, the catch all of ‘other similar remuneration’ was intended to ensure that all fruits derived from employment were captured.
The UT concluded that it should construe the term ‘employment’ under English law without regard to s 15.
Why it matters: Having found that ITTOIA 2005 s 15, ‘which might be said to be a “deeming” provision’, fell away, the UT added: ‘I do not necessarily consider that more narrowly drawn “deeming” provisions … would be incapable of supplying … the meaning of “employment” for the purposes of Article 14 …It is simply that this case does not arise here.’
