EIM33102 - Seafarers’ Earnings Deduction: meaning of offshore installation before 6 April 2004
Section 385 ITEPA 2003
Origins of the term offshore installation
Before 6 April 2004, the definition of offshore installation was found in The Mineral Workings (Offshore Installations) Act (1971), which was brought within the Offshore Installations & Pipeline Works (Management & Administration) Regulations (1995). The Health & Safety Executive (HSE) publish these regulations. From 6 April 2004, the definition of offshore installation is in Section 837C ICTA 1988. From 6 April 2007, the definition can be found in Section 1001 ITA 2007. See EIM33103 for guidance for tax years 2004-05 onwards.
Definition of offshore installation
The 1995 HSE Regulations describe offshore installations by
reference to activities carried out. These activities are:
- exploring for, or exploiting, mineral resources by means of a well
- storing gas and recovering the stored gas
- where the main use is to provide accommodation for workers on offshore installations.
EIM33104 identifies different categories of vessel and structure used in the offshore oil and gas industry and indicates whether they are ships or offshore installations for the purposes of the deduction.
Territorial limitation
For the purposes of the HSE Regulations a structure is only
treated as an offshore installation while it is operating in the UK
sector of the continental shelf. Section 385 overrides this
territorial limitation so structures engaged in these activities
anywhere in the world should not be accepted as ships for the
purposes of the deduction.
For example, an employee who works on an offshore
installation drilling off the coast of West Africa does not perform
duties on a ship, is not a seafarer and is not entitled to the
deduction.
Offshore installations in transit
The HSE apply health and safety rules appropriate to ships to offshore installations in transit. However, installations in transit, whether towed or self-propelled, remain within the definition of offshore installation in the 1995 Regulations. Employees working on offshore installations that are being moved are not seafarers for the purposes of the deduction.
Changes in use
An offshore installation may cease to be used for one of the
specified activities in the 1995 Regulations and be used for
another purpose. It will remain an offshore installation unless the
change is permanent and there is no intention to undertake any of
the specified activities again.
Mobile installations such as mobile drilling rigs may be
taken out of use for relatively extensive periods, for example,
when work is not available. Such installations will cease to be
offshore installations until they are ready and preparing to depart
for a new working station. An employee may claim that he or she is
a seafarer when working on a mobile installation that has been
taken out of use. The facts should be carefully considered in each
case. Little or no use in navigation in the relevant year may mean
that the installation will not be a ship on first principles (see
EIM33101).
(This text has been withheld because of exemptions in the
Freedom of Information Act 2000)
