I have another opinion regarding this. I believe that the bearing capacity of the foundation when governed by settlement limitation should still be reduced if the foundation sandy soil is submerged. There is no question regarding the reduction of bearing capacity of the soil if there is a rise of water table except that the linear variation is from the normal value when groundwater is at a depth B below the footing of width B, to 1/2 this value when water level reaches the surface of the surrounding soil (not the bottom of the footing). The overburden weight is accounted for in the BC calculation through the term qNq and all of it has to be submerged to have a reduction of 0.5 (assuming of course an average soil unit weight twice that of water).
Now, such a rise of water table, which reduces the effective pressures within the sand to roughly half their original values, also correspondingly reduces the stiffness of the sand. Hence, the footing pressure required to produce a settlement of 1", if the water level is at the surface of the surrounding soil,is only about half that required to produce a 1" settlement if the water is at a depth B or more beneath the footing.
The correction factor can be expressed as follows :
Cw = 0.5 + 0.5Dw/(Df +B)
Where
Dw is the depth of water from the surface of surrounding soil
Df is the depth of the footing base from the surface of the surrounding soil
This is retrieved from the textbook "Foundation Engineering" by Peck, Hansen & Thornburn (2nd. Ed.)
Check-out this reference for further details.
So if let's say you calculate your allowable BC for an estimated settlement of 1" using Bowles formula based on SPT results, you would have :
qall = N x Kd x Cw / F1 (B<=1.2m)
But you would need to recalculate your settlement based on the obtained qall to verify that it is suitable.
Hope this can be helpful.
Rami