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HMRC internal manual

Employment Income Manual

HM Revenue & Customs
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Seafarers’ Earnings Deduction: standing or stationed in any waters: duration of stay at work location

Section 1001(4)(a) and (b) ITA 2007

For the purposes of a claim to Seafarers’ Earnings Deduction (SED), an individual must perform duties of an employment on a ship. The definition of a ship excludes an offshore installation (see EIM33103).

To be an offshore installation a vessel must perform a relevant use (EIM33103) whilst “standing or stationed” in any waters (EIM33108).

How long does a vessel need to be standing or stationed

A vessel which provides supplies to an offshore drilling rig will need to be standing and/or stationed for a period whilst it offloads those supplies. HMRC would not normally regard a stay of short duration whilst unloading supplies as falling within the statutory definition of standing or stationed in any waters, which implies a longer period of time without significant movement.

The definition of an offshore installation derives from rules found previously in Health and Safety Executive (HSE) legislation in the 1990s. When applying that legislation there was a rule of thumb sometimes used that a vessel standing or stationed for more than three days was regarded as “standing or stationed” for the purpose of the definition of an offshore installation, whereas a vessel that was standing or stationed for three days or less did not satisfy the definition. In a small number of cases this rule of thumb was used in claims to SED.

It has been suggested to HMRC that this rule of thumb could be used in borderline cases to assist in deciding whether a vessel performed its duties whilst “standing or stationed”. As this is not a statutory rule, its application has no legal basis and cannot be used to determine a case one way or another but HMRC accepts that as a broad guide it may be helpful in some borderline cases.

It has been suggested also that a rule of thumb based on three days is not always sufficient. For example, a vessel’s operations may be delayed for a couple of days due to bad weather, or when working in deep water it may take as long as one day to lower the necessary equipment to the sea floor before work can begin and another day to bring the equipment back to the surface, leaving only one day for the work to be carried out on the sea floor. Also imposition of very tight timetables may compromise safety which is of paramount concern in the seafaring industry.

Consequently for 2008/09 onwards HMRC will accept, as a rule of thumb only, that a vessel that spends five or fewer days at one location, should not be regarded for the purpose of the definition of an offshore installation as performing its duties whilst standing or stationed. On the other hand, a vessel that spends more than five days at one location should be regarded as standing or stationed.

Each case will depend on its facts and HMRC will apply this wholly non-statutory rule in a fair and reasonable manner. For example, if a vessel was due to perform a task planned to take four days stationed but exceptional weather conditions forced operations to be postponed for two days in the middle of the job, so that the vessel spent six days stationed to complete the task, HMRC may be prepared to accept that the five day rule still applies.

Vessels in transit

In CIR v Langley (see EIM33111) it was held that when a vessel classified as an offshore installation transits to its next work location, it continues to be regarded as an offshore installation during the time spent in transit unless it has ceased permanently to be put to a relevant use.

This decision confirmed HMRC’s view of vessel classification for time spent in transit - see EIM33102.

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