THOUSANDS of offshore workers stand to share in a £100m windfall - after a landmark Court of Appeal ruling yesterday on the definition of a ship.

The judgement means all oil rig workers will now be classed as seafarers and will not be liable to pay tax on income earned before 1998.

About 20,000 oil workers nationally, including an estimated 2,000 from the North-East, are expected to benefit from the ruling, entitling them to 100 per cent tax rebates or an exemption from tax demands.

The case had been brought to settle an anomaly over jack-up oil rigs, which are towed into position and then jacked up on legs which reach to the seabed.

The Inland Revenue had claimed that as the jack-up rigs did not actually float they could not be classed as ships and so the workers could not be considered as seafarers.

But Mr Justice Carnwath, sitting in the Court of Appeal, ruled that the rigs had the principal characteristics of ships and so the workers were entitled to the same tax concessions as seafarers.

The test case had been brought by North Sea workers James Perks, David Newrick and James Grainger, who were all employed on jack-up rigs. Silas Taylor, the solicitor representing the three workers, said: "We are absolutely delighted by this ruling, which will enable all Britons working on sea-based rigs to claim tax concessions.

"The result has been that the courts have now recognised jack-up rigs as ships, which could have other legal implications in the industry."

The General Commissioners, who rule on tax disputes with the Inland Revenue, had decided at earlier hearings that the men were seafarers and were entitled to the concessions.

But the Inland Revenue had taken the case to the High Court, where Mr Justice Ferris ruled in their favour, deciding that the jack-up rigs were not ships.

Following that judgement, North Sea workers set up a fighting fund to take the case to the Court of Appeal, which produced yesterday's ruling.

The Inland Revenue said it was still considering the implications of the judgement but would not be appealing to the House of Lords.

Mr Justice Carnwath, giving yesterday's decision, said the court had been asked to rule on whether the earnings were from "employment as a seafarer", which would exempt them from tax on work undertaken outside the UK.

He said "employment as a seafarer" was defined as "performance of duties on a ship", but the relevant legislation left the word "ship" undefined.

Mr Justice Carnwath said in his judgment: "The primary definition of 'ship' in the Oxford English Dictionary is 'a large seagoing vessel'. Both characteristics were undoubtedly fulfilled by the rigs in this case."

Aleyn Jordan, an accountant involved in the case, said the anomaly dated back to attempts by Governments in the late 1970s to find the manpower for North Sea oil exploration. Workers on drill ships were given tax concessions but the Inland Revenue refused to extend this to jack-up rigs.

He said: "The ruling today has shown that this was a load of nonsense because they work in the same manner as semi-submersibles."

A change in the law on concessions in 1998 means the ruling only applies to tax claims made before that date.