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HMRC internal manual

National Insurance Manual

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HM Revenue & Customs
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Special cases: Class 1 - mariners: host employer, mariner works in category A, B, C or D waters - background

The UK shipping industry has transferred significant numbers of employment contracts either to non-UK members of shipping groups or unconnected offshore employers (offshore manning arrangements).

Uncertainty about the application of the NICs rules to offshore manning arrangements led to the issue of Tax Bulletin 49. However, that did not cover the application of the Host Employer Regulations in Paragraph 9, of Schedule 3 of the Social Security (Categorisation of Earners) Regulations 1978, SI 1978 No 1689 and their application, particularly to Mariners working with in the UK’s territorial waters. There remained some uncertainty about their scope in respect of such Mariners.

A subsequent review of the legislation concluded that the Host Employer Regulations can apply to all Mariners and there is a liability for employers’ NICs for UK shipping companies that use offshore manning companies.

Press Release 56/03 explained the new understanding of the legal position, based on legal advice, and that new regulations would be introduced to explicitly exempt Mariners whose duties were wholly or mainly outside UK territorial waters from the scope of the Host Employer Regulations.

Following consultation with the shipping industry, where someone is employed as a Mariner, the Host Employer Regulations will now only apply where the Mariner works wholly or mainly in certain types of inshore waters.

In view of the lack of clarity in the previous guidance no employers’ NICs were to be collected, under the revised interpretation before 13 October 2003, from the shipping companies affected by the Host Employer Regulations.