Seafarers Tax

[Aleorea]

I'd like to create a thread where seafarers can come for accurate help with regards to claiming tax back... Rather than paying the ?190 or there abouts to the tax agencies charge... it would be much better for people to save that cash and do it through just filling a couple of forms in...

Rather than just posting links to the HMRC website does anyone have any actual knowledge on the process?

There is the half day rule where you need to be out the country for 183 days in any 365 day period

You need to have at least one foreign crew change?

Can anyone else add to this?

[YoungMariner]

The Seafarers Earning Deduction (SED) should firstly not be confused with the Foreign Earnings Deduction (FED) which allows for only 90 days per annum out of the country. The SED came about after the Falklands War whilst the Royal Navy was scaling back. Several Merchant Vessels have been used in World War II and in the Falklands war as troop carriers and to support the war efforts (this is in addition to the likes of the Royal Fleet Auxillary and the Andrew Wier MOD Strategic RoRo's), and there to ensure that this can occur in the future then there must be British Seafarers. Unfortunately due the high salaries we demand it can be difficult to be competitive, therefore the government's response is the SED.

The SED was abused for several years by the likes of Offshore Divers, Researchers and ROV operators etc, however this loophole was closed by the government a few years ago and made a blanket rule for anyone working onboard a fixed offshore vessel (jack up rigs, FPSO etc).

If you work onboard a UK registered ship you will pay Income Tax and National Insurance at source (PAYE), however if you meet the requirements for the SED then you can reclaim the Income Tax (not the National Insurance) by way of submitting the Self Assessment annually.
If you work on a foreign flagged vessel you do not pay Income Tax and National Insurance annually, however should you not meet the requirements for the SED after you submit you Self Assessment in April then you will have to pay the owed Income Tax. You must also make a declaration for the National Insurance.

You should keep a copy of your itinerary from every ship you sail on, the best policy is to take a photocopy of the Official Logbook pages. I'd also recommend keeping a copy of all your boarding card stubs/online checkin boarding passes from aircraft you join to prove the dates that you are of the country. I personally keep a diary in Microsoft Excel with details what city and country I am in every single day (goes back to 2001), and the flight numbers and routing of all flights I have taken. Also you must keep ALL of your payslips, do not lose these, become organised and file them carefully.
Generally your Self Assessment is accepted without any problems, however a certain percentage are investigated, and this where you will be required to send in copies of your discharge book, boarding passes, pay slips, itineraries etc and they will also probably contact your company.

If you work on foreign flag and just don't bother filling in the Self Assessment, be very very careful, as you could find yourself in prison for Tax Avoidance even if you were eligible under the SED.

For straightforward applications it's very easy to do the Self Assessment yourself, however if you have additional income such as from rental properties or share dividends it would be advisable to use a specialist Seafarer Tax Advisor who will know what entitlements you are due and how to minimise your tax liabilities on the additional incomes.

If you consider living in another European Country yet still taking advantage of the SED be very careful. A friend of mine who had a house in France and one in the UK, found himself spending more and more time in France. Eventually the French Tax Authorities caught up with him, and despite him submitting the SED, they managed to deduce he was liable for tax in France and was hit hard for several years of back payments.

Calculate your days carefully, don't leave it to chance. If you're borderline, consider taking a holiday overseas. A few weeks in Tenerife, Thailand or Timbuktu.

If you are unsure about whether you eligible, especially those working on UK based ferries or the North Sea, I'd certainly take tax advice, and take it early on so you that you can use the advice to you advantage. It's not worth finding out after April 4th that if you'd taken a weeks holiday you would have been able to recover a years worth of tax.

[YoungMariner]

Note: The advice given above is worth exactly what you paid for it...

[Aleorea]

Thanks for the contribution AncientMariner. That Excel thing is a good idea.

[GuinnessMan]

Whilst this is a very good idea, I'd still be cautious and get proper advice from Seatax as we're not the experts, they are! At the end of the day, ?190 is a small price to pay comparative to the level of tax you get back.

[ETwhat?]

If its a fairly cut and dry set up its plain enough to do yourself, 4 months on 2 months off never near the uk etc. but anything else is worth getting the professionals in for. a tax bill for one year sucks getting them for more because you didnt know all the rules is really bad

[chris]

I passed the tax exam as part of my Chartered Accounting training so I'm happy to give basic tax advice to anyone, but for all things SED related you're best off paying the experts for advice.

Regarding the living abroad aspect, I'm thinking of making the UK my permanent home but also spending time in Austria when I'm not at sea. You can be a non tax resident of Austria if you spend less than 180 days there compared to the 90 days for the UK.

I was therefore hoping to be non tax resident in both countries but I'm still to take advice on this (some tax minimisation was in my exam but not this area). I suppose the alternative would be to declare myself a UK tax resident and go self assessment and claim SED.

Regarding rental income and share dividends from earlier, for basic rate tax payers they are both taxed at 10% and if you are claiming SED you may still have your personal allowance to reduce your taxable income. Try to avoid being a higher rate tax payer as everything gets taxed at 40%, although you can essentially increase your personal allowance by making pension contributions, thus staying a basic rate tax payer. As ancientmariner said, their are various reliefs /allowances available for rental income so its worth using an advisor at least for the first year so you're aware of what you can claim; rent a room allowance, mortgage interest, wear and tear allowance.

[Aleorea]

Whilst this is a very good idea, I'd still be cautious and get proper advice from Seatax as we're not the experts, they are! At the end of the day, ?190 is a small price to pay comparative to the level of tax you get back.

But if you can get your tax-back through filling a few forms in without paying ?190 it would be better.

[GuinnessMan]

But if you can get your tax-back through filling a few forms in without paying ?190 it would be better.

But if you get it wrong, you run the risk of loosing all you tax (A fair few thousand) to the tax man. If you're due to get ?5,000 or even ?10,000 back in tax, what is ?190 in the grand scheme of things?

[Steve]

But if you can get your tax-back through filling a few forms in without paying ?190 it would be better.

Absolutely agree. Took me about 20 minutes to do it online this year. An accountant's fees are much more use to me in my pocket than theirs.

[Steve]

But if you get it wrong, you run the risk of loosing all you tax (A fair few thousand) to the tax man.

If you do not understand what you are doing, pay an accountant, but the basics of SED are not arcane magick.

[captdiggo]

be very careful with sed. About 6 years ago I recieved a bill from the taxman for over ?5000 because I had missed the 183 day rule by ONE day. The whole crew got caught because they decided to investigate just one crew members refund. Just wish I had paid seatax instead of trying to claim it myself

[Clanky]

If its a fairly cut and dry set up its plain enough to do yourself, 4 months on 2 months off never near the uk etc. but anything else is worth getting the professionals in for. a tax bill for one year sucks getting them for more because you didnt know all the rules is really bad

Absolutely agree with this.

The online self assessment forms are easy and straightforward to use, and if you are fairly obviously UK resident and are easily meeting the requirements then you can do it yourself so long as you keep all the documentation (ship's itineraries / draught notices, boarding pass stubs, cash machine slips from foreign countries) for at least 7 years, but the moment that it starts to get a bit dicey, i.e. you live on a rock in the middle of the Atlantic or you are very close on tax days then that ?190 is nothing compared with losing out on a years tax.