Corporation tax was not payable on certain sums received by a company in respect of the sale of oil found in the UK continental shelf as the payments were not within Article 6 of the UK/Canada double tax treaty, since they did not amount to a “right to work” the oil field.  

In the early 1980s, a UK subsidiary (SUK) of a Canadian tax-resident company (Sulpetro) was granted a licence by the UK government to explore part of the North Sea continental shelf (the Buchan Field). In 1986, BP Petroleum Development Ltd (BP) acquired from Sulpetro both the share capital in SUK and the rights that Sulpetro had under its agreement with SUK to any oil acquired from the Buchan Field. In return, BP promised to make payments to Sulpetro calculated by reference to the volume of oil BP acquired once the price at which that oil could be sold by BP rose above a certain level (‘the payments’). The respondent bank (RBC) subsequently took over from