Travel costs for offshore oil and gas taxpayers – what can you claim for?
Understanding our taxation regulations does require a certain amount of translation from ‘tax language’ to regular English. It is useful to clarify HMRC’s definitions of some of the particular phrases that are in the rules around your travel costs. It’s helpful for offshore workers to get to grips with what the terms mean before trying to make a claim.
Mini ‘Tax Phrases’ Dictionary!
- A task that is of “limited duration” – 40% of your working time spent at this location for a period of continuous work that lasts for up to 24 months.
- A task that is for a “temporary purpose” – a work visit that is “self-contained”. Something that is a ‘one off’, with a specific purpose and not part of a sequence of repeat visits.
- “Temporary workplace” – a place where an employee is there to work for a limited duration or for a temporary purpose. This is a place of work which lasts or is expected to last for no longer than 24 months.
The bottom line is if your rig is classed as a ‘temporary workplace’ then you can claim a tax rebate for your travel from home to your mainland departure point. If it is determined to be a ‘permanent’ workplace then you cannot.
Temporary Workplaces for offshore workers tax refunds
If you have a temporary workplace on an “offshore installation” then you are eligible for certain income tax exemptions, whether you pay the cost, your company pays, or if it is reimbursed.
These include;
- Subsistence
- Transport to transfer you from your home to the point where you leave the mainland
- Accommodation
Transfers between rigs for offshore workers tax
The sticky part comes when we consider the rules for transfer of workplace from one rig to another. HMRC’s rule is based on the premise that if your basic commute is not vastly longer or more expensive when you move to another rig, then two different rigs will be treated as one ‘permanent workplace’. There are also two different rules depending on whether you are transferring to a rig in the same, or a different, field.
Transfer to a rig in a different field
If you move to a new rig in a different field then both can retain their classification as a ‘temporary workplace’. This means that you can claim for your travel expenses from home to the mainland departure point.
Transfer to a rig in the same field
If you are going to be working in the same field on your new rig then they will be treated as the same workplace. This makes it much easier to exceed the maximum 24 months of continuous work that is allowed in a “temporary workplace”.
There is reasoning behind this decision. One point is that if you live near your mainland departure point, then the change of journey from the mainland to another rig is unlikely to be a considerably longer or more expensive journey. The second point is that if you have a long journey from your home to the departure point, then transfer to another rig will only make a proportionally small amount of difference to your overall journey cost and time.
But it doesn’t end there! In March of 2004, a “rule of thumb” was presented to your industry representatives, designed to simplify the application of the ‘change of workplace, 24 month’ rule. If you transfer to a rig in the same field AND you live over 75 miles from the mainland departure point, then the two workplaces remain 2 separate workplaces when applying the 24 month rule. Leaving you able to claim for ‘home to departure point’ travel costs. The thinking behind this is that if you live more than 75 miles away then your commute is not substantially changed by moving to a different rig in the same field. It was pointed out that this was not a rule which could lead to the reopening of cases that were already settled, but should be adhered to in any current cases.
The thinking behind this rule, as explained above, is cited as the case HMRC will make during any disputes with employees that end up at a ‘First -Tier Tribunal’. Interestingly, the ’75 mile rule of thumb’ cannot be brought up during such proceedings because it is not an actual law.
