Seafarer's Tax Deduction

BACKGROUND

UK nationals who are ‘not-resident’ in the UK pay no UK tax on their earnings from overseas employments. However, to qualify as ‘not-resident’ it is necessary to go abroad for a period including a complete income tax year (6 April to the following 5 April) and not to return to the UK on a regular basis.

The government recognised that this disqualified many people from tax exemption, even though their earnings were mostly from foreign employments, and so they introduced a tax deduction for people working abroad for any qualifying period of 365 days. This was withdrawn from most people in 1988, but in order to encourage seafarers to remain in employment on British vessels, and to enable British seamen and women to compete for jobs in a labour market which is increasingly cost-conscious, seafarers continue to be eligible for the exemption, which currently stands at 100% of earnings from foreign voyages.

CONDITIONS

In order to qualify for the 100% deduction, you must:

Be employed aboard a vessel
(a vessel is anything that will float and that has a means of propulsion other than manual -ie not paddled or rowed!) Certain ships operating in the oil and gas industry are not classified as ships, but as 'offshore installations'. Of you work aboard one of these vessels, even if on a long sea passage, you will not qualify. For more details, please call to discuss
For a period of at least 365 days
(this doesn’t have to be the same vessel, and there can be breaks for leave etc..)
That visits a foreign port
(or operates outside UK territorial waters)
On each date of arrival in the UK, the total days spent in the UK to date from the beginning of the period must be less than half the total days in the period
(a day in the UK is one on which you are in the UK at midnight at the end of the day. Days of arrival and departure are not counted)

Days overseas on holiday count as qualifying days

Example 1

Sally lives in Portsmouth. She starts work for Brittany Ferries on the cross-channel ferries. She works two weeks on and one off. The ferry timetable is such that it leaves Portsmouth every night at 23:58, and so Sally is never in the UK at midnight at the end of any day that she is working. She works from July 2016 to August 2017, with four weeks leave, two of which she spends in Spain. Her employers deduct UK tax from her wages.

Sally would not qualify as not-resident, as she does not spend a complete income tax year (6 April to 5 April) out of the UK, but she qualifies for the 100% deduction for seafarers as she fulfills all the conditions. As she works more weeks on than off, she will have no trouble avoiding spending too many days in the UK.

If she were to work two weeks on and TWO weeks off, however, she would have to be very careful and to count her days accurately. It would probably be necessary for her to pay for a return crossing on the ferry as a passenger every few weeks to maintain her tax exempt status, and to take all her holidays abroad!

Example 2

Jack lives in Liverpool. He is a deck hand who signs on for a single voyage or a fixed contract and can work for several different companies in a year. He signs on a coastal vessel in January 2016 for six months. The vessel operates between the UK ports of Tilbury and Lowestoft, so even where it may travel outside UK territorial waters, as it has not called at a foreign port, none of these days qualify.

In March 2016, however, the vessel’s itinerary changes and every second week it calls at Rotterdam. The days spent travelling from Tilbury to Rotterdam and from Rotterdam to Lowestoft count as qualifying days for the 100% deduction, but not the legs of the voyage from Lowestoft to Tilbury. He renews his contract in July 2016 and continues until April 2017. At this point he has a qualifying period of 390 days from March 2016 and 200 qualifying days out of the UK, so he can claim the deduction for the whole year on earnings from that employer.

He then, unfortunately breaks his leg and has to spend three months ashore, not returning to sea until July 2017 when he flies to Bilbao to join a cruise ship. The new ship operates entirely outside the UK and so Jack’s qualifying days now commence when he leaves the UK to join the ship and cease when arrives in a UK airport. He returns to the UK at the end of August to visit his sick mother. He stays for only two days and returns to his ship for a further three months.

At the end of November 2017, when he returns to the UK, his total days are 610 of which he has spent only 284 days in the UK, which appears to qualify him for the deduction. However, the calculation has to be done on each and every arrival in the UK, and when Jack returned in August for his short visit, his total period at that date was 520 days, of which only 230 were qualifying, so the qualifying period was broken and a new period had to start. This can be reckoned from July 2017, so he has to maintain his new qualifying period until July 2018 before he can make a tax claim.

Confused?!

Don’t worry, help is at hand! Let

THE TAX LADY
calculate your qualifying days and complete your tax return


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