Clark (Inspector of Taxes) v Perks (No 2); MacLeod (Inspector of Taxes) v Same; Guild (Inspector of Taxes) v Newrick and Another
| Jurisdiction | England & Wales |
| Judgment Date | 19 April 2000 |
| Date | 19 April 2000 |
| Court | Chancery Division |
Chancery Division.
Ferris J.
Timothy Brennan (instructed by the Solicitor of Inland Revenue) for the Crown.
Michael Davey (instructed by Andrew M Jackson & Co, Hull) for the taxpayers.
The following cases were referred to in the judgment:
Addison v Denholm Ship Management (UK) Ltd ICR[1997] ICR 770
Gapp v Bond ELR (1887) 19 QBD 200
Harlow, The ELR[1922] P 75
Mac, The ELR (1882) 7 PD 126
Merchants Marine Insurance Co Ltd v North of England Protecting and Indemnity Association UNKUNK(1926) 26 Ll L Rep 446; 26 Ll L Rep 201(CA)
Mudlark, The ELR[1911] P 116
Pepper (HMIT) v Hart TAXELR[1992] BTC 591; [1993] AC 593
Polpen Shipping Co Ltd v Commercial Union Assurance Co LtdELR[1943] 1 KB 161
Steedman v Schofield UNK[1992] 2 Ll L Rep 163
Wells v Owners of the Gas Float Whitton No. 2 ELRELR[1896] P 42 (CA); [1897] AC 337 (HL)
Income tax - Relief for foreign earnings - Taxpayers' employment on "jack-up" drilling rigs - Rigs with retractable legs capable of being towed from place to place - Special provisions for "seafarers" qualifying for relief - Definition of seafarers required employment on ships - Whether jack-up rigs "ships" - Income and Corporation Taxes Act 1988, Income and Corporation Taxes Act 1988 section 193 subsec-or-para (1) schedule 12 subsec-or-para 3s. 193(1), Sch. 12, para. 3(2A).
These were appeals by the Revenue against two decisions of the general commissioners for Norwich City and one decision of the Great Yarmouth commissioners that "jack-up" drilling rigs were "ships" for the purposes of claims by offshore oil workers under Income and Corporation Taxes Act 1988 section 193s. 193 of the Income and Corporation Taxes Act 1988 for foreign emoluments relief.
In the early 1990s the three taxpayers were employed aboard one or other of two similar drilling rigs known as "jack-up rigs".
A jack-up rig was a floating hull with retractable legs which could be lowered to stand on the sea-bed. The legs could be retracted upwards to enable the floating hull to be towed from place to place. The rigs had no engines of their own but had to be towed. It was also possible to transport a rig "piggy-back" style on a cargo vessel. When under tow the rigs were controlled by a tow master who gave directions to the tugs from the bridge of the rig on which was installed a satellite navigation system as well as a compass and a depth sounder.
The rigs were: registered as ships with Panama Merchant Marine Registry; flagged; marked with a load-line; had a registered tonnage; carried lights as required by international regulations; complied with safety at sea regulations; carried certified coxwains; were fitted with the required radio equipment and global marine distress and safety equipment operated by a qualified radio operator; were required to comply with the international convention for the prevention of pollution; and were subject to annual surveys as ships. They were also treated as ships by the port and Customs authorities; the Department of Transport; and the Health and Safety Executive.
The taxpayers appealed against the refusal of their claims for relief for foreign emoluments. They did not qualify for the relief generally, but claimed to qualify under the special provisions for the employment of seafarers. Employment as a seafarer was defined in Income and Corporation Taxes Act 1988 schedule 12 subsec-or-para 3para. 3(2A) as "employment consisting off the performance of duties on a ship". Therefore, the question was whether the jack-up rigs were "ships".
Held, allowing the Revenue's appeals:
1. The findings of fact by the two panels of commissioners, to the extent that those findings represented findings of primary fact were binding on the court, but the meaning of the term "ship" and the question whether the facts found brought the case within that meaning were matters of law for the court.
2. While there was no definition of a ship in the Taxes Acts, the section 749Merchant Shipping Act 1894, s. 749(re-enacted in 1995) defined a ship as including "every description of vessel used in navigation". That definition was not exhaustive, but in so far as any one characteristic might be said to be required for something to be a ship, it was that it was capable of being used and was in fact used for the purpose of navigation. It could not realistically be said that the function of the jack-up rigs was "navigation" in the sense of conveying persons or cargo from place to place by water. The function of the rigs was to provide a firm base to enable drilling to great depths under the sea-bed. Once in position the rig would perform in a similar manner to that in which a rig on land would perform. The only difference was that a rig stood in the water. Overall, the rigs did not have sufficient of the characteristics of ships to lead to the conclusion that each of them was a ship for the purposes of Income and Corporation Taxes Act 1988 schedule 12 subsec-or-para 3Sch. 12, para. 3(2A) of the 1988 Act.
3. In considering whether the rigs were ships, the ability to float and to be moved about from place to place by means of outside assistance was merely incidental to the rigs' static, non-floating work. The fact that they had no means of self-propulsion was not relevant, and the fact that regulatory requirements applicable to ships had to be, or were, complied with were not to be taken into account.
1. At a meeting of the commissioners for the division of Norwich City held on 23 April 1998, Mr Perks appealed against an assessment for the year 1992-93 in the sum of £49,481 less expenses of £90 made against him under Sch. E earnings and benefits received by him in the course of his work as a senior drilling foreman aboard the jack-up rig "Santa Fe Magellan".
2. It was common ground between the parties that if the jack-up rig Santa Fe Magellan was a ship for the purposes of Income and Corporation Taxes Act 1988 schedule 12 subsec-or-para 3para. 3(2A) of Sch. 12 to the Income and Corporation Taxes Act 1988 then Mr Perks' employment on the jack-up rig constituted employment as a seafarer and, all other conditions being satisfied, Mr Perks would qualify for a foreign earnings deduction upon the whole of his emoluments for the year 1992-93 under Income and Corporation Taxes Act 1988 section 193s. 193 of the 1988 Act.
3. Mr Perks attended and was represented by Mr Jordan (M Hoose & Co, chartered accountants). Mr Clark an inspector from Centre 1 TDO, East Kilbride appeared in person and was assisted by Mr Bates from HMIT Norwich. Mr Perks gave oral evidence.
4. This paragraph listed the documents admitted in evidence.
5. As a result of the oral and documentary evidence, the following facts were proved or admitted:
(a) M Perks was employed on the jack-up oil rig Santa Fe Magellan during the tax year in question as a senior drilling foreman.
(b) The jack-up rig Santa Fe Magellan had a floating hull and retractable legs. From the information supplied about the Santa Fe Magellan the commissioners were satisfied that when the jack-up was stationary for the purposes of drilling, the legs would be down so that the feet would stand upon the sea bed and the hull would be jacked up so that it was clear of the water and the commissioners were satisfied that the legs could be retracted upwards to enable the floating hull to be towed from place to place.
(c) The jack-up rig Santa Fe Magellan had no propulsive thrusters or engines of its own.
(d) The Santa Fe Magellan was moved by being towed by at least two tugs. A tow master controlled the towing operation, particularly as to the speed and direction of the tugs, giving instructions to the tugs from the bridge of the jack-up rig.
(e) An alternative method of transporting a jack-up rig is for it to be carried "piggy-back" style upon a cargo vessel.
-
(f) It was contended on behalf of the inspector that:
(a) The purpose of foreign earnings deductions was to provide incentives to merchant marine seafarers; the legislation was not intended to benefit oil-rig workers.
(b) As there was no definition of "ship" in the 1988 Act, and as yet no case law on the subject, the Revenue relied on the Merchant Shipping Act 1894 and the ordinary dictionary meaning.
-
(c) In deciding whether a jack-up was a "ship" the test to be applied was as follows:
(i) Is the jack-up capable of navigation? i.e. Is the jack-up capable of free and ordered movement upon the sea? An ability to float and be moved (rather than moving itself) is not sufficient.
(ii) Is the jack-up actually used in navigation?
(iii) Is any navigation more than merely incidental to its real work?
(g) The requirement of a jack-up to comply with marine, health and safety regulations and anti-pollution regulations did not make it a ship.
(h) The jack-up rig Santa Fe Magellan therefore did not come within the definition of a ship and the commissioners should find accordingly.
7. It was contended on behalf of Mr Perks that -
(a) A jack-up rig is capable of navigation.
(b) A jack-up rig without a propulsion system could be a vessel capable of free and ordered movement and could be a ship.
(c) The official documentation required by a jack-up confirms its status as a ship.
(d) The commissioners should find accordingly.
8. The following summary of cases was provided for us by Mr Jordan on behalf of the Mr Perks.
(a) The Mac (1882) 7 PD 126 - dredging hopper moved by towing: hopper used for dredging purposes, not fitted with oars or other means of propulsion and generally moved by towing was a ship within theMerchant Shipping Act 1854 - replaced by the Merchant Shipping Act 1894, s. 742.
(b) The Mudlark [1911] P 116: A hopper barge with a rudder and other gear, used for dredging purposes, but with no means of propulsion and towed to sea and back by...
To continue reading
Request your trial
-
Clark (Inspector of Taxes) v Perks (No 2); MacLeod (Inspector of Taxes) v Same; Guild (Inspector of Taxes) v Newrick and Another
...claim allocated to multi-track under the Civil Procedure Rules 1998 (SI 1998/3132), r. 12.7, 14.8 or 26.5. Facts In Clark v Perks TAX[2000] BTC 133 taxpayers sought to appeal against a judgment of Ferris J in respect of three cases stated by general commissioners of income tax in relation t......
-
CGU International Insurance Plc v AstraZeneca Insurance Company Ltd
... ... my opinion the answer to question (2) is the same and consistent with the answer to question (1) ... open to any serious doubt; or (putting it another way) , is there any realistic possibility that ... (Practice Note) [2001] 1 WLR 13 at 16, Clark v. Perks [2001] 1 WLR 17 at 23, North Range ... ...
-
Gregory v Turner; R (on the application of Morris) v North Somerset Council
...of permission on the judge's costs order. The grounds on which he seeks to do so are not very clear from his letter. In Clark v Perks [2001] 1 WLR 17, it was made clear (at para 17) that permission to appeal against a costs order made by an appeal court refusing permission to appeal would ......
-
Cart v Cart
... ... the truth about her relationship with another man, and had allegedly returned to live with him, ... per cent of assets, and, were the assets the same now, the debt would be 16.23 per cent of assets; ... College London [2001] 1 WLR 13 and Clark (Inspector of Taxes) v Perks [2001] 1WLR 17 at ... ...