Seafarers’ Earnings Deduction: offshore installations and ships: 2008/09 onwards: the meaning of “exploiting mineral resources by means of a well”
Section 1001 ITA 2007
The definition of an offshore installation is explained in EIM33103. For 2008/09 onwards, the decisions in two cases issued in January 2008 (Torr) and June 2009 (Spowage) are directly relevant to the classification of a vessel as either an offshore installation or a ship (see EIM33105 and EIM33106).
2008/09 onwards - the meaning of “exploiting mineral resources by means of a well”
The Tribunal Judge in Spowage (EIM33112) distinguished the construction and maintenance duties carried out by the Prosafe vessels, from the activities performed by the PSA in Torr (EIM33111).
Whereas the PSA’s activities were closely associated in a physical sense with the production of oil at the well-head (e.g. working down the well, pumping heavy liquid into the well, repair/replacement of Xmas trees over wellheads and construction of manifolds to connect pipelines), the Prosafe vessels carried out construction and maintenance duties “remote” from the production process.
The Tribunal Judge decided that while “exploiting mineral resources by means of a well” (EIM33103) extends to duties performed by a vessel in association with extraction, storage and processing of oil and gas, it does not extend to repair and maintenance duties performed away from the well-head. These duties cannot be part of the process of exploiting mineral resources ”by means of a well”, if they are performed away from the well.
Accordingly for 2008/09 onwards when considering whether a support vessel such as a diving support vessel (DSV), a construction vessel or a well service vessel (WSV) should be classed for SED as an offshore installation or a ship, one must take into account the nature of the duties that it performs. If one of these vessels performs its duties while not closely associated with the production process (e.g. away from the well-head and/or associated sub-sea equipment) it is not involved in exploiting mineral resources by means of a well. It follows that it is not performing a relevant use (unless it satisfies one of the alternative definitions of that term - EIM33103) and that it is not an offshore installation.
On the other hand, if one of these vessels carries out duties like the PSA in Torr, which are closely associated with the production process (e.g. at or near the well-head and/or associated subsea equipment), those duties are part of the process of exploiting mineral resources by means of a well. It follows that the vessel will be an offshore installation, as long as it is standing or stationed (EIM33108) while it performs those duties.
(This content has been withheld because of exemptions in the Freedom of Information Act 2000)