News
Inland Revenue New Guidance - SPOWAGE case
Following numerous representations by seafarers and their representatives the Inland Revenue issued revised guidance, in Feb 2009, relating to what ships qualify for the SED.
The Revenue then issued amended guidance in August 2009 following the taxpayers sucessful appeal in the SPOWAGE case which is now final as the Revenue have stated that they are NOT going to appeal against it.
A brief summary of the main points is as follows:
1. Employees employed on oil rigs, floating production platforms, etc will not qualify for SED. These are classed as 'offshore installations and not ships. The law has not changed here and is the same as before. However Flotels may now qualify in certain circumstances.
2. Employees who work on diving support vessels, heavy lifting and well service vessels (and other similar) will now have to consider the type of ship they work on and what it does:
- Is the primary purpose of the vessel as a ship or does it have a dual purpose e.g mineral extraction, well service etc.
- does the vessell actually work at the well or is it 'directly' involved in the exploitation of oil or gas
- does it perfom that other use e.g well service whilst being stationary or stationed for 5 days or more
The Revenue do not accept that the Spowage case has had any significant effect on the stationary test which we strongly disagree with. If they maintain that view then there will undoubtedly be more more appeals to test the point in the near future.
Revenue interpretation of 'stationed'
Apparently support vessels which work next to the same offshore site for more than 5 days will be regarded as stationary despite the fact that they may move continuously round the whole of the 'complex' under their own propulsion. The Revenue has now clarified this point as follows:
'If a vessel moves around a single platform, for example from the west
side to the east side, or moves away and then back to the same platform,
due to weather or operational reasons, in HMRC's view the vessel remains
"stationed" ...
In HMRC's view a vessel may also be "stationed" (in the sense of "on
station") if it moves between two or more structures....
If a vessel is engaged in a relevant use, but has to interrupt
operations for a short period because of, for example, adverse weather
this is ignored for the purpose of determining the length of time standing .....'
The rules would become difficult and impracticable to apply if such events were excluded...'
We would also point out that this is only guidance which has no legal authority. We strongly disagree with this interpretation just as we did when the original guidance was issued back in October 2008 and February 2009.
Also, just to recap the revised guidance was issued in response to claims made by workers on the Pride South America in Feb 2008, who lost their case, which is shown here;
However the Spowage case has significantly restricted what will now be classed as an offshore installation and each potential claim, including semi-submersibles and Flotels, should be carefully considered to ascertain whether a claim may be possible. In short it depends on what the semi-submersible actually does. Please refer to the Spowage case summary page for further details.
The full Inland Revenue guidance can be found here:
http://www.hmrc.gov.uk/manuals/eimanual/updates/eimupdate060209.htm
01st Sep 2009