Ruling, related to seatax and workers on ship and boats


After 12 long years in conflict with HMRC as to how Revenue Practice should be applied to a day of absence in respect of a seafarer’s qualifying period (not to be confused with a day of absence with regard to where the duties are performed paragraph 5, schedule 12) we have now had success through the courts.

In 2000 we were advised that we had been applying incorrect practice in connection with day of absence, this we found strange as we had always worked closely with HMRC to ensure that our clients did not fall foul of the legislation in connection with seafarer’s exemption, which in turn implied that we had been giving incorrect advice to our client’s for many years. This we could not accept as we have always prided ourselves on the fact that we are one of the most experienced Marine Tax Advisors in the UK. We have always given advice in accordance with the Inland Revenue’s PUBLISHED GUIDANCE, which since circa 1987/88 stated very clearly that a day of absence from the UK is any day when you are outside the UK at the end of the day (midnight). It then goes on to say “we normally treat a vessel as having left the UK at the moment it leaves berth or anchorage on a voyage which will take it outside UK territorial waters, arrival times are treated in a similar way”. HMRC said their view was that this practice only applied to vessels sailing directly to a foreign port.

In 2001 they then produced a letter (sent from HMRC to a firm of Accountants) stating that vessels must be going directly to a foreign port in order to comply with Revenue Practise. However, this letter was dated July 1980 and we pointed out to HMRC that this practice was superseded by all their publications after that date and therefore had no relevance to what was later practice.

In the following years we did our best to convince HMRC that the Revenue Guidance Published post 1980 must be the one to apply to a day of absence and forwarded them a substantial amount of documentation to support our argument. This clearly showing that their later Published Guidance made no mention of a foreign port. We were in no doubt that we had followed HMRC Guidance correctly. HMRC would not answer the question as to how an unpublished letter dating from 1980 could take precedence over guidance published much later and simply kept telling us that we were the only Tax Advisors who disputed the explanation of the application provided by them. This left us no choice but to try and have the case brought before the Courts, which we did thanks to the assistance of Nautilus and in particular Peter McEwen.

One worrying point in all of this was the apparent ease that most other Marine Tax Advisors accepted without question what HMRC told them. Even more worryingly it transpires that some “Marine Tax Advisors” were not even aware that this concession existed. Therefore we can only assume that their clients’ were never made aware of the correct practise with regard to a day of absence and therefore putting them at a disadvantage to other seafarers’ using Marine Tax Advisors who applied the correct Guidance, and may have lost them the chance to make a claim to the seafarers’ earnings deduction, possibly losing them thousands of pounds. Anyone claiming to be a Marine Tax Advisor specialising with schedule 12 should have been fully aware of this practise!

Below is an article written by one of these Marine Tax Advisors. The leader to this article states “PROVIDING DEPENDABLE INCOME TAX ADVICE ON SEAFARERS EARNINGS DEDUCTION (S.E.D) CLAIMS.

“There has been comment that there has been a change in the way in which SED claims are treated by the Revenue. It is being claimed that the Revenue have changed their view on what constitutes a day out of the UK. I can tell you quite categorically that there has been no change at all, it is, and always has been, the fact that a qualifying day for tax purposes is one in which, at midnight, you are outside the UK, that is outside the twelve mile limit.

As a concession the Revenue will accept that where you are leaving the UK on a voyage to a foreign port, and actually arrive at the foreign port, then as soon as you leave the UK port you are accepted as being outside the UK. Similarly, if you are flying from the UK your time of departure is taken as the scheduled time of departure for the flight you are on.

It follows on, therefore, that you can have a situation where two ships leave a UK port at the same time, one going to a UK port and the other going to a foreign port, and for the first ship it is not a qualifying day but it is for the second”.

They also stated that “when the rules were changed in 1991” they “contacted the Revenue for clarification of this and this is the interpretation we were given, and the one we have worked to ever since. Also in 2001 a letter was issued to all Tax Advisory services re-stating the interpretation, so there can be no real excuse for not understanding this point.”

Click here to download the ruling PDF

High Court Approved Judgement Between Cameron and Others Comissioners for Hm Revenue and Customs

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