Following the decision in Torr & Ors v CIR (the “Pride of South America” case), HMRC has amended its guidance on Seafarers Earnings Deduction (SED); as a consequence, obtaining SED may not in future be as straightforward as previously, in the context of offshore oil and gas industry.
In addition to the requirement to demonstrate that a vessel is a “ship” for the purposes of SED as opposed to an “offshore installation”, it is now necessary to consider whether that vessel was performing “relevant use” while “standing or stationed”. Any ship which carries out its activities while anchored or while being held stationary under manoeuvring thrusters will be treated as an offshore installation; only vessels which carry out their activities “in a transient manner” (ie while not “standing or stationed”) will count as ships for SED. A seafarer’s claim now needs more verification than merely the entry in the Seafarers Discharge Book: the taxpayer needs to be asked if the vessel was dynamically positioned or anchored for a significant part of the time. The relevant section of HMRC’s Employment Income Manual is attached. www.hmrc.gov.uk/manuals/eimanual/EIM33104.htm