Seafarers Earnings Deduction: HMRC's Best Kept Secret

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Tax has always been an ugly word in the yachting industry, but for UK seafarers it needn’t be!

They are in the unique position of not having to pay any tax, but in order to facilitate this it is necessary to file an annual tax return.

Yet many seafarers still do not declare their income, and this is due in part to them not being familiar with the process of filing a tax return.

Below we list a number of the most commonly asked questions relating to the seafarer's earning deduction, and clear up the mystery surrounding this unique piece of income tax legislation.

Read on to find out more or click a link below to skip to a question of your choice.

Questions

What Do I Need to File a Tax Return Under the SED?

1. Income

You will need to confirm how much money you have earned over the tax year (6th April – 5th April).

If you worked in a salaried position, which most of you do, then this figure is easily calculated.

2. Employer Details

You will need to be provide the name of your vessel and where possible the name and address of your employer or management company.

3. Days spent in the UK

A day in the UK is if you were there at midnight, so the day you land is counted as a day in.

It is important to keep an accurate count of the number of days you have spent in the UK.

You are allowed a maximum of 183.

Seafarers will often not submit a tax return, as they do not feel that they have the correct documentation to support it.

Can I Spend Over 183 Days in the UK & Still Qualify?

The simple answer to this question is “Yes!”.

The question which will tend to follow is “how?” and the answer may not seem so simple.

If you have established your initial qualifying period and then find that you have spent more than 183 days in the UK in any following 365, you can continue to declare under the SED under the half day rule.

In order to do so you must satisfy the following equation:

The half-day rule is applied at each return to the UK. All days since the start of the claim are added and divided by 2 (A).
Then all days spent in the UK since the start of the claim are added (B).
The two figures are compared and where (B) exceeds (A) there will be a failure in the claim period i.e. you will not qualify.

In an attempt to explain more clearly, when you return to the UK all days since the beginning of you qualifying period are added, if you have spent less than half this number in the UK in the period, your qualification can continue.

It should be noted that although you can spend more than 183 days in 365 in the UK, the half day rule will not apply if the 183 days are consecutive.

Spending 183 days consecutively in the UK will cause an automatic fail in your qualifying period.

Can My Vessel Spend Time in the UK?

Many Seafarers also believe, that they cannot declare their income under the SED if their vessel has spent time in UK waters.

This is most certainly not the case.

Current legislation states that income from working on a vessel can be declared under the deduction if the voyage either begins or ends in a foreign port.

The voyages which are not eligible will be those which leave the UK and return to a UK port without first docking in a port overseas.

My Ship is Operating in UK Waters. Does This Count as a 'UK Day'?

As long as your vessel is outside the 12-mile limit at midnight, this will not count as a UK day for the purposes of the deduction.

Whilst you may not be able to evidence this in the normal manner e.g. by travel receipts or flight stubs, you may be able to ask you captain to sign a letter certifying your dates spent outside the 12-mile limit.

Do I Need a Seaman’s Discharge Book, Payslips & Flight Stubs?

1. Seaman’s Discharge Book

This will record your time whilst on ship, but it will not record your time whilst on holiday out of the UK.

It is also not a requirement to have this for claiming the SED.

2. Pay Slips

You are not required to provide pay slips when filing a tax return.

Bank Statements are also accepted as well as a formal statement of earnings.

3. Flight Stubs

In the days before the Internet, this was the only way to record international travel.

Most Airlines nowadays record your travel movements, removing the need to keep flight stubs.

I Worked Onshore in the UK This Year. Can I Still Claim the SED?

If you have spent less than your allotted time in the UK, but worked during the time you have been onshore, this is not a problem.

Whilst any income earned from working onshore can’t be filed under the deduction, you still have your personal allowance of £10,500 (2017/18 tax year) which you can earn tax free.

This amount is not affected by claiming the deduction for your offshore work.

If this article has hit a resounding note and you wish to file a tax return, we are here to help.

Speak to Us or Comment!

If you have concerns about your yachting income and how this affects your tax status, we want to hear from you. Get in touch with us today or let us know your thoughts in the comments section below.

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Any advice in this publication is not intended or written by Marine Accounts to be used by a client or entity for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party matters herein.