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 UK permanent establishment 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.
  • Mr Fowler considered that his income was business profits for the purposes of the UK/South Africa double tax treaty which made them exempt from UK Income Tax.
  • HMRC considered he should be treated as employed in terms of the treaty, so subject to UK tax.
  • The FTT found in favour of the taxpayer. The Upper Tribunal (UT) allowed HMRC’s appeal and the Court of Appeal reversed that decision finding in favour of Mr Fowler, that his income was from self-employment, though one judge dissented. HMRC appealed.

The Supreme Court unanimously allowed the 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.


Tax treaty: Self-employed or employed?
When is an individuals employed or self-employed for the purposes of a tax treaty? Why does it matter?

External link

Fowler v HMRC [2020] UKSC22