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HMRC internal manual

Employment Income Manual

Seafarers’ Earnings Deduction: meaning of offshore installation before 6 April 2004

Section 385 ITEPA 2003

Origins of the term offshore installation

Before 6 April 2004, the definition of offshore installation was found in The Mineral Workings (Offshore Installations) Act (1971), which was brought within the Offshore Installations & Pipeline Works (Management & Administration) Regulations (1995). The Health & Safety Executive (HSE) publish these regulations.

From 6 April 2004, the definition of offshore installation was in Section 837C ICTA 1988. From 6 April 2007, the definition can be found in Section 1001 ITA 2007. See EIM33103 for guidance for tax years 2004-05 onwards.

Definition of offshore installation

The 1995 HSE Regulations describe offshore installations by reference to activities carried out. These activities are:

  • exploring for, or exploiting, mineral resources by means of a well
  • storing gas and recovering the stored gas
  • where the main use is to provide accommodation for workers on offshore installations.

EIM33104 identifies different categories of vessel and structure used in the offshore oil and gas industry and indicates whether they are ships or offshore installations for the purposes of the deduction.

Territorial limitation

For the purposes of the HSE Regulations a structure is only treated as an offshore installation while it is operating in the UK sector of the continental shelf. Section 385 overrides this territorial limitation so structures engaged in these activities anywhere in the world should not be accepted as ships for the purposes of the deduction.

For example, an employee who works on an offshore installation drilling off the coast of West Africa does not perform duties on a ship, is not a seafarer and is not entitled to the deduction.

Offshore installations in transit

The HSE apply health and safety rules appropriate to ships to offshore installations in transit. However, installations in transit, whether towed or self-propelled, remain within the definition of offshore installation in the 1995 Regulations. Employees working on offshore installations that are being moved are not seafarers for the purposes of the deduction.

Changes in use

An offshore installation may cease to be used for one of the specified activities in the 1995 Regulations and be used for another purpose. It will remain an offshore installation unless the change is permanent and there is no intention to undertake any of the specified activities again.

Mobile installations such as mobile drilling rigs may be taken out of use for relatively extensive periods, for example, when work is not available. Such installations will cease to be offshore installations until they are ready and preparing to depart for a new working station. An employee may claim that he or she is a seafarer when working on a mobile installation that has been taken out of use. The facts should be carefully considered in each case. Little or no use in navigation in the relevant year may mean that the installation will not be a ship on first principles (see EIM33101).

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)