For the mostpart, a ship is a ship. For the purposes of the seafarers earnings deduction (SED) though, there are times when it might not be.
UK tax legislation allows employment income earned on a 'ship' to potentially qualify for the SED claim.
"So what is a ship?"
It's a good question. And legislation leaves it rather open, saying that it 'does not include an offshore installation'. Clearly, this rules out oil rigs which are fixed to the seabed from being 'ships' for the purposes of the SED.
In relation to vessels involved in the oil and gas industry, HMRC guidance lists a few other types of vessels which they do not consider to be 'ships':
- fixed production platforms
- floating production platforms
- floating storage units
- floating production storage and offloading vessels (FPSOs)
- mobile offshore drilling units (drillships, semi-submersibles and jack-ups)
In addition, they go on to say 'Any vessel engaged in exploitation of mineral resources by means of a well whilst standing or stationed in any waters, is an offshore installation.'
However, the line gets slightly more blurry when you consider vessels which are not fixed to the seabed, and would ordinarily ships, but are then held on a fixed position for a length of time using dynamic positioning (DP).
Since 2008/09, case law has determined that if a vessel is not held at a single position under DP for more than 5 days, it should be regarded as a ship. In these cases, the claim should stand.
Of course, a successful SED claim is dependent on other factors, but the positioning of the ship from one day to the next should not be overlooked.