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This post was sent to to an OILC-RMT member by David Shawyer an accountant well known in the offshore circles

Following discussions with the seafarers unit at Centre 1 in East Kilbride I set out below a flier sent out to all our seafarer clients.

Dear Seafarer
There has been a recent Case (known as the Spowage Case) which has affected the availability of Seafarer’s Earnings Deduction (SED).
You will recall there was a previous Torr/Pride South America Case that restricted the availability of the relief, but there has been a relaxation of these rules as a result of the most recent Case.

For 2008/09 onwards, a vessel involved in duties not physically associated with oil or gas production (e.g. repairs carried out away from the wellhead and/or associated sub-sea equipment) will be regarded as a ship and SED will be due.

However, where a vessel is working in close association with a well and/or subsea equipment involved with the production of oil and gas (e.g. working down the well, pumping liquid into the well, removal and replacement of Xmas trees, and construction of manifolds) and is “standing” or “stationed” in any waters, then SED will not be due as the vessel will be regarded as an offshore installation.

There has been concern that once a vessel was regarded as an offshore installation, then SED would be withdrawn for the remainder of the tax year. However, we have been assured it would only be in very unusual circumstances that this would apply. (Such as where a vessel spent the greater majority of its time carrying out work alongside a well etc.) So, in most situations the SED will only not be due where a vessel:
1. Works in close proximity to a well and/or sub-sea equipment.
2. Is stationed there for more than 5 days – in which case the SED will only be disallowed for the period of time this work is carried out (and any leave time immediately thereafter).

Hopefully, in most cases, the practical effect of this will be that any earnings not eligible for relief will be covered by the personal allowance (£6,035 for 2008/09 and £6,475 for 2009/10), and so full tax refunds will be available.
If your Return is reviewed by the Revenue, they will probably ask for independent proof of whether the vessel has been stationed for more than 5 days. It would therefore be a good idea to obtain a statement from the Captain of the vessel along the lines of:

(Name of Ship)

To whom it may concern,
As Master of the (ship), I confirm without prejudice, that (ship) has not undertaken any exploration of minerals whilst standing or stationary for more periods in excess of 120 hours during the tax year (2008/2009) and up to (date).

David can be contacted at the following web site for advice
EU/EEA residents qualify. This ensures the SED provisions are compatible with the EU Treaty of which the UK is a signatory I believe.


Who is likely to be affected?

1. EU and European Economic Area (EEA) residents who pay UK tax on their earnings as a seafarer. Broadly speaking a seafarer is a person who works on a ship.

General description of the measure
2. Legislation will be introduced in Finance Bill 2010 to extend the Seafarers’ Earnings Deduction to EU and EEA resident seafarers, ensuring the provisions are compatible with the EU Treaty.

Operative date
3. The measure will have effect on and after 6 April 2011.

Current law and proposed revisions
4. Seafarers’ Earnings Deduction can provide 100 per cent UK tax relief for the earnings from carrying out duties as a seafarer wholly or partly outside the UK, during an eligible period. One of the qualifying conditions for Seafarers’ Earnings Deduction is that the claimant must be ordinarily resident in the UK. This condition will be extended so that seafarers who are EU or EEA residents can claim Seafarers’ Earnings Deduction on their earnings as a seafarer that are liable to UK income tax. There are no other changes to the provisions for Seafarers’ Earnings Deduction.

Further advice
5. If you have any questions about this change, please contact Kathy Prior on 020 7147 2582 (email: Information about Pre-Budget Report measures is available on the HM Revenue & Customs website at

James Mc
Site Admin

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