In Fowler v HMRC [2020] UKSC22 the Supreme Court found that a diver was an employee for the purposes of a double tax treaty and so subject to UK tax on his income.

  • Mr Fowler, a South African resident worked as a diver in the North Sea. 
  • He had no permanent establishment in the UK and was employed under an employment contract.
  • Section 15 ITTOIA 2005 deems divers who work on the continental shelf to be self-employed for tax.
  • The taxpayer thus considered that his income was business profits for the purposes of the UK/South Africa double tax treaty and this made them exempt from UK Income Tax.
  • HMRC considered that he should be treated as employed in terms of the treaty, and so subject to UK tax.
  • The First Tier Tribunal (FTT) found in favour of the taxpayer.
  • HMRC appealed to the Upper Tribunal (UT).

The UT

The UT reviewed the treaty and considered how terms that were not specifically defined by the treaty should be defined. It decided that tax treaties are not an artefact of English (or other British) law so domestic law, and interpretations, should not be considered. 

  • International law gives 'employment' its ordinary meaning so the UT applied Article 14 to determine taxing rights before domestic law taxes the income as trading.
  • Mr Fowler was therefore deemed to be employed for the purposes of the treaty and the UK, therefore, held taxing rights.

Mr Fowler was granted leave to appeal to the Court of Appeal. 

The Court of Appeal

Lewison LJ took the approach of focusing on what is taxed and not how it is taxed. The starting position was that as a diver, diving income was employment income. It was taxed as self-employed income by virtue s.15 which then deemed it to be self-employed income for tax. In terms of the double tax treaty the income was employment income and the UK had taxing rights.

Henderson LJ and Baker LJ took a different approach they agreed that the s.15 deeming provision created an 'imaginary world'  where actual earnings of Mr Fowler from his employment must instead be regarded as profits from self-employment. The charges to tax on employment income and trading income are mutually exclusive. The words 'for Income Tax purposes' in section 15(2) were clearly wide enough to embrace the purposes of double taxation arrangements given effect in domestic law by section 6 of the Taxation (International and Other Provisions) Act 2010. 

The taxpayer's appeal was allowed.

The Supreme Court

The Supreme Court unanimously allowed HMRC's appeal, finding that Mr Fowler was an employee.

  • S.15, in deeming self-employment, creates a statutory fiction that an employed diver is carrying on a trade for the purposes of determining the manner in which they are taxed, such as which expenses are tax-deductible.
    • That fiction is not created to render a qualifying diver exempt from UK tax or to allow adjudication between the UK and South Africa as potential recipients of tax. Its purpose is to adjust the basis of a UK Income Tax liability which already exists.
    • “A deeming provision should not be applied so far as to produce unjust, absurd or anomalous results unless the court is compelled to do so by clear language.”
  • The Treaty is not concerned with the manner in which taxes are levied, so it would be contrary to the purposes of both the Treaty and ITTOIA to redefine the scope of the treaty by reference to ITTOIA and would produce an incongruous result.


Although it is pretty rare for any self-employed individual (other than an offshore diver) to seek to claim treaty relief, this case is one to bookmark as it also includes some useful discussion on interpreting tax treaties where there are ambiguities as to interpretation.

External case links 

Fowler v HMRC EWCA 2544 Civ

The Commissioners for HM Revenue and Customs v Martin Frederick Fowler: [2017] UKUT 0219 (TCC).

Fowler v HMRC [2016] TC05009

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