If you are a UK tax resident and are employeed aboard a ship operating outside UK waters you may qualify for reduction in your income subject to UK tax, know as the Seafarer’s Earnings Deduction (SED).
There are three steps to deciding if you have a claim, and these are explained below. Any claims must be made in a Self-Assessment Tax Return.
1. A valid claim period – This will be a period of at least 365 days beginning and ending with a period outside the UK. A period outside the UK can be a period of employment, a period of unemployment or a holiday abroad. Once a 365-day period has been attained it is carried on until there is a failure. A failure occurs if at any time during the claim period you:
- Spend 183 or more continuous days in the UK or
- Break the half-day rule.
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. The claim period ends on the previous return date. A new claim period must then commence from the earliest possible date of leaving the UK.
2. A valid foreign port for each employment in each tax year – Each employment in each tax year must include at least one voyage or part voyage that begins or ends at a foreign port. A voyage or part voyage that begins or ends at an oil or gas installation (including a rig in drilling mode) located outside the UK and outside the designated areas of the UK continental shelf can be regarded as beginning or ending at a foreign port for this purpose.
3. The employment must be on board ships – A seafarer is someone that works on a ship. There is no definition of a ship in tax law but “offshore installations” are specifically not regarded as ships.
For more information or to discuss you circumstance we will be happy to talk to you without obligation.