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Taxation: Shipping

Volume 481: debated on Thursday 23 October 2008

To ask the Chancellor of the Exchequer what the reasons were for the decision by HM Revenue and Customs to review the guidance on vessels that do not qualify under the seafarers’ earnings deduction income tax rules. (226230)

To ask the Chancellor of the Exchequer (1) what recent representations he has received on seafarers’ earnings deduction; and if he will make a statement; (226147)

(2) whether he plans to meet the Secretary of State for Transport to discuss the effects of the reclassification of seafarers’ earnings deduction on the recruitment and retention of British seafarers.

The background to the decision by HM Revenue and Customs to revise its guidance on seafarer’s earnings deduction (SED) is a decision 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 the implementation with interested stakeholders before the revised guidance is issued.

Treasury Ministers regularly receive representation on tax issues from a variety of sources and hold discussions and meetings with ministerial colleagues on a wide range of issues.