SE40207 - Schedule E Cases I and II: location of duties performed on a vessel or aircraft: example

Section 132(4)(b) ICTA 1988

The following examples illustrate the effect of the statutory rules in section 132(4)(b) that deem certain duties to be carried out inside the United Kingdom. See SE40206 for an explanation of the legal background.

Example 1

A merchant navy ship sails from Felixstowe to Aberdeen. The ship’s course takes it outside of UK territorial waters for a part of the voyage. The crew includes both resident and non- resident individuals.

All of the crew members are treated as performing duties in the United Kingdom during the voyage.

Example 2

An aircraft flies from Edinburgh to Dusseldorf.

Residents are treated as performing duties in the United Kingdom throughout the flight

Non residents are not treated as performing duties in the United Kingdom. Only earnings for duties actually performed in the United Kingdom will be chargeable under Case II Schedule E.

Example 3

A merchant navy ship steams from Southampton to Ostend. It remains in United Kingdom coastal waters until it is off Harwich. It then leaves territorial waters.

Resident seafarers are treated as performing duties in the United Kingdom throughout the voyage

Non-resident seafarers are not treated as performing duties in the United Kingdom. Only earnings for duties actually performed in the United Kingdom (including territorial waters) will be chargeable under Case II Schedule E

Different Rules for the Foreign Earnings Deduction

Note that different rules apply for the purposes of the Foreign Earnings Deduction (see SE33033).