There are a lot of questions that surround the Seafarers Earnings Deduction from those who are employed on ships and work offshore as yacht crew.
There is also a lot of misinformation and we aim to enlighten you with this specialized report on what exactly the Seafarers Earnings Deduction is and who exactly is entitled to it.
Why the HMRC’s SED programme is a seafarers dream!
To begin with, you need to be a UK resident under the new Statutory Residence Test Rules which makes you taxable under your earnings under the United Kingdom tax laws.
Now, this may be different if you qualify for the Seafarers Earnings deduction which is a specialized tax discount that applies to UK residents who are employed as seafarers as long as they meet certain criteria.
This specialized tax deduction was created by the UK government to make employment more beneficial for a UK resident among the competition that lurks within the worldwide seafaring markets.
We will give you an overview of how the Seafarers Earnings Deduction works and will help you understand whether or not you may qualify and how to apply below.
Of course, always speak to your yacht crew tax specialist to fully understand your current tax position. This article should only be treated as a general opinion and not be used in any official capacity.
How do I qualify as a seafarer?
Under UK law a seafarer is a person who is employed and works all of his or her hours on a ship or does most of their work on the ship and any other specific tasks that are related to the main duties performed on the ship.
Unfortunately members of the military do not get to apply or claim the seafarers earnings deduction.
There are specific rules on the definition of what exactly constitutes a ship. There is no actual definition of what a ship is but there is a list of examples of what is not a ship and not applicable to the SED.
If you are employed on any of the following in an offshore location then you do not qualify: If you work on a fixed, or floating production platform, floating storage units or floating production storage or offloading vessels as well as mobile offshore drilling units, flotels and drillships, semi-submersible drilling units and jack up units.
In order to be able to claim the Seafarers Earnings Deduction, you have to meet the following requirements.
First of all in a working year you have to have spent time either beginning your employed voyage from a foreign port or ending your trip from a foreign port.
If you are employed in the oil or gas drilling offshore rigs then you can be covered for your voyage to and from an offshore rigging platform as long as it is outside of the UK and not in the UK designated areas of the waterways.
To meet the valid claim period you have to spend at least 365 consecutive days outside of the United Kingdom voyaging from and to foreign destinations.
Once you have passed the 365 days you are then eligible for the Seafarers Earnings Deduction.
The only way you can possibly interrupt this process and lose your access to the SED is if you incur a failure.
A failure is regarded as either spending over 183 days abroad or if an employee breaks the half-day rule which is applied when a seafarer enters the UK.
All days that have begun since the start of the claim are added up and divided in 2. Then all days that are in the UK are added to the above amount.
If the second amount exceeds the first number, it will cause a failure.
A claim period ends on the return date of your voyage and a new claim period only begins at an early date since departing the United Kingdom for employment.
In order to take advantage of the Seafarers Earnings Deduction if it applies to you as a seafarer, then you will have to keep track of your records and be ready to supply them for tax purposes.
Do not throw anything away and keep a hold of them as they are incredibly important. We will show you what you need.
This begins with such things as your employment records, the freeboard logs of the ships you were employed on, your passports and visas, hotel bills and restaurant receipts, airline ticket receipts, travel vouchers, boarding passes and your seafarer’s discharge book.
The SED is an incredibly helpful tax deduction and makes working in the seafaring industry more beneficial for the UK citizen making it more competitive.
As long as you work on a ship for over 365 days a year and do not go through any failures and ship from or too foreign ports, not in the UK or UK designated waters then this special deduction will apply to you.
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