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This is the first type mentioned at OT41530 and an example is the UK/Greece DTA (SI1954/142).

In this double taxation agreement (DTA), the term “the UK� is defined as “Great Britain and Northern Ireland, excluding the Channel Islands and the Isle of Man� (Article II(l)(a)). This covers England, Wales, Scotland and Northern Ireland and the surrounding Territorial Sea but not the designated areas (see OT40650).

»Ê¹ÚÌåÓýapp treaty also defines the terms “one of the territories â€� as “the United Kingdom or Greece, as the context requiresâ€� (Article II(1)(c)). For the purposes of this definition “the UKâ€� takes the restricted definition in Article II(l)(a).

Article III(2) provides inter alia that “»Ê¹ÚÌåÓýapp industrial or commercial profits of a Greek enterprise shall not be subject to UK tax unless the enterprise carries on a trade or business in the UK through a permanent establishment situated thereinâ€�. This means for example that a company which is a “resident of Greeceâ€� is not subject to UK tax on profits unless the company is engaged in a trade or business in “the UKâ€� (on a geographic restricted definition) through a permanent establishment situated in “the UKâ€� (again on a restricted geographical definition).

Consequences for a person protected by this DTA include:

• Activities carried on in a UK designated area do not rank as activities carried on in “the UKâ€� [Article II(l)(a)]. CTA09\S1313, ITTOIA05\S874 and ITEPA03\S41 are therefore effectively overridden.
• A facility in a UK designated area (for example an accommodation platform on the UK Continental Shelf made available on a long term basis by a Greek company engaged in construction work) could not rank as a permanent establishment in “the UKâ€� [Article III(2)] as the location of the platform is not within the UK as defined in the treaty.
• Although CTA09\S1313 & ITTOIA05\S874 treats profits arising to a non-resident from “exploration or exploitation activitiesâ€� carried on in the UK, the UK territorial sea or in a UK designated area as profits of a trade carried on through a UK branch or agency this deeming provision is overridden by the requirement that only profits arising from a trade or business carried on through an actual permanent establishment in “the UKâ€� (on a restricted definition) may be charged to UK tax [Article III(2)].

So a Greek company which carries on short term activities in the UK territorial sea (say pipe laying) or long term activities on the UK Continental Shelf (say platform hook-up work spread over 12 months) is likely to be protected against the effects of CTA09\S1313. It would of course be necessary to test that the company was indeed a “resident of� Greece and that it had been able to arrange its operations in such a way as to avoid the setting up of a permanent establishment in “the UK� under the “restricted definition�.

If the Greek company traded through a branch on the UK mainland it would be liable to UK tax by virtue of CTA09\S5 rather than CTA09\S1313(1) . As the branch will then rank as an actual permanent establishment under the UK/Greece DTA, the company will not be exempt from UK tax.