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SPOWAGE Case summary
Summary of the Spowage case - June 2009
The appeals all related to entitlement to the seafarers’ earnings deduction (SED). The Tax years in question were 2001 to 2004 inclusive. The facts related to the following vessels, Safe Britannia, Safe Caledonia and Safe Lancia. The principal question was whether these vessels were ‘offshore installations’ (and therefore the taxpayers would not have been entitled to SED) for the purposes of the relevant legislation.
A picture of Safe Lancia is shown below:
All three of the vessels which were the subject of the appeals were semi-submersible units. Each was comprised of a platform supported by a minimum of four columns sitting on hulls which are ballasted below the water-surface allowing the vessels to float in a stable manner. The facilities available on the platforms had been subject to change during the course of the relevant period. Nonetheless, at all times each of the vessels offered accommodation berths, office space, storage areas, workshops and two cranes.
The scope of the work undertaken on the vessels was inspection, testing , maintenance, installation, on-board fabrication work, the transfer of materials, diving support, and anti-corrosion work. The vessels moved regularly, if not continuously, between the different installations. The crew were either marine crew or construction personnel.
Other operations performed were related to the pre-treatment of metal prior to fabrication, assembly and painting, general fabrication and construction work, the transfer of equipment to another semi-submersible platform, the construction of a new diving support platform on the Safe Lancia, the replacement of a flare tip, the construction of a storage rack and its installation on the ‘Abkatum platform’.
The tax payer’s appeal was upheld at the Tribunal as follows:
‘That there is overwhelming evidence which establishes on a balance of probabilities that
(i) while operating under the 2003 Contracts the Safe Lancia and the Safe Britannia were not operating as flotels; they were not being used mainly for the provision of accommodation,
(ii) rather, they were and were being used as multi-purpose maintenance and construction support vessels,
(iii) while operating as such multi-purpose vessels they were not standing or stationed in any waters for any significant periods but were regularly more or less constantly moving around …
(iv) in doing so these vessels were not engaged in the exploitation (or exploration with a view to exploitation) of mineral resources by means of a well.
21st Jun 2010