If you’re an employee and work at sea, you may be able to reduce your tax bill by getting the Seafarers’ Earnings Deduction.
To get the deduction you must have:
- worked on a ship
- worked outside of the UK long enough to qualify for the deduction - usually a minimum of 365 days
- been resident in the UK or resident for tax purposes in a European Economic Area (EEA) State (other than the UK)
You can’t get the deduction if you were:
- a Crown employee (for example, a Royal Navy sailor)not a UK resident
- not a resident of an EEA State (other than the UK)
If you had more than one job you’ll still get the deduction against your seafarer pay if you meet all the conditions.
Royal Fleet Auxiliary employees are eligible for this deduction if they meet all the conditions.
Evidence to be provided annually:
SED schedule completed and signed. Blank forms are available on our website.
Update of sea service to include a clear photocopy of your Discharge Book entries (including inside front cover showing your personal details) or Discharge Certificates, plus qualifying day’s sheet, certified ships movement and precise dates of entering and leaving the UK.
Airline tickets, E-tickets, boarding passes for all UK travel.
Passport stamps for all non EU travel.
Holiday booking invoices and travel documentation.
Credit/debit card receipts for expenditure incurred by you whilst on holiday. Such receipts should be obtained 1 or 2 days after arrival in your holiday destination, sometime in the middle of your stay and 1 or 2 days before departure/UK return.
Overseas car hire receipts
Working in the North Sea
This is a particularly contentious area with HMRC. If you are working in the North Sea area you may have to prove all the nights that you are outside the twelve mile limit at midnight during a trip. A Discharge Book entry is no longer sufficient in this case, as HMRC are aware that a number of boats will be returning to port during their 28 days shift.
HMRC has also recently confirmed that Water and Freeboard Notices are not acceptable from now on as evidence of time outside the twelve mile limit. These notices only show dates of departure from and return to a port, not the time outside the twelve mile limit which is the main issue when it comes to investigations.
We recommend that you request a statement, signed by the Captain or Chief Officer, confirming all the dates on which you were outside the twelve mile limit during the trip. You should obtain this for each and every voyage around UK and North Sea waters. A number of ships are now able to produce a monthly statement like this but if your ship is not up to this, you might want to keep a log of your own and get the Captain to sign it.
What is the definition of outside the UK for SED?
A qualifying day is one in which you are absent from the UK at midnight. Under normal circumstances HMRC regard being outside the twelve mile limit as being outside the UK. However, by concession they are prepared to accept that where a vessel leaves its UK berth before midnight and goes to a foreign port, then that is a day out. BUT, if a vessel sails from a UK port to another UK port then it is only when the vessel is outside the twelve mile limit at midnight that it is regarded as outside the UK.
Type of Vessel
- The word “ship” is not defined in tax law, but “offshore installations” used in the offshore oil and gas industry are specifically identified and are not regarded as ships for the purposes of the deduction. The following list of offshore installations is given as a guide only:
Fixed production platforms
Floating production platforms
Floating storage units
Floating production storage and offloading vessels (FPSOs)
Mobile offshore drilling units (drill ships, semi-submersibles and jack-ups)
Any vessel engaged in exploitation of mineral resources by means of a well whilst standing or stationed in any waters, is an offshore installation.
If you work on an offshore installation anywhere in the world, you are not regarded as a “seafarer” for the purposes of the deduction and your earnings for duties performed on such a vessel or structure will not qualify for the deduction.
Where there is any doubt as to your vessels eligibility to qualify as a vessel HMRC are now asking to see the Daily Progress reports that specify the precise nature of the vessels’ work. They are not now prepared to accept a statement from the Captain of the vessel confirming that your vessel did not undertake any exploration for, or exploitation of, minerals during the year whilst standing or stationed for in excess of 120 hours.