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Volume 481: debated on Tuesday 21 October 2008

To ask the Chancellor of the Exchequer (1) what estimate he has made of the average financial effect on seafarers if the seafarers’ earnings deduction is removed; (228223)

(2) if he will review the decision of HM Revenue and Customs to remove the seafarers’ earnings deduction.

HM Revenue and Customs (HMRC) is not removing seafarers’ earnings deduction (SED). Rather HMRC will revise its guidance on SED to reflect a decision made by the Special Commissioners, an independent appellate body, in the case of Torr and Others v. CIR (SpC679). The great majority of seafarers who claim SED will not be affected by this decision.

I am aware of the concerns raised by the Special Commissioners decision in this case, which centred on whether the vessel on which the appellants performed their duties was a ship or an ‘offshore installation’ within the meaning of the legislation. The Special Commissioners decided it had been operating as an offshore installation, and refused the appellants’ claims to SED.

Broadly speaking, an offshore installation is a vessel that is engaged in exploiting mineral resources and is not mobile while doing so.

HMRC has written to tax practitioners about this decision and will discuss implementation with interested stakeholders before the revised guidance is issued.