Salary or profit?

Scope of the South Africa/UK double tax treaty

The taxpayer was resident in South Africa. In 2011-12 and 2012-13 he worked as a qualified diver in the UK continental shelf waters of the North Sea. HMRC decided that the income from these activities came within Art 14 (income from employment) of the South Africa/UK double tax treaty and was therefore chargeable to UK income tax. The taxpayer said his diving income constituted business profits within Art 7. As such it was exempt from UK income tax because he had no permanent establishment in the UK within the meaning of Art 5.

The First-tier Tribunal said the treaty did not define the words ‘enterprise’ and ‘business’. Therefore their meaning as well as that of ‘salaries wages and other similar remuneration derived … in respect of an employment’ should be determined in accordance with UK tax law.

The...