If you work as a seafarer you may be eligible for Seafarers Earnings Deduction (SED), allowing you to reduce your tax bill. To determine if you qualify, you must meet particular requirements, and understanding these criteria is essential.
Below is a detailed list outlining the key eligibility criteria for claiming SED in three major steps:
1. A Valid Claim Period.
a. First, you must have worked outside the UK for 365 days before claiming SED.
b. A period outside the UK can be due to employment, unemployment, or a holiday abroad. As soon as these 365 days have been attained and confirmed, it is carried on until a failure occurs.
c. A failure or breach occurs if you spend 183 or more continuous days in the UK at any time during the claim or break the ‘half-day rule’.
d. The half-day rule is applied upon each return to the UK. All days since the start of the claim are added and divided by 2 (A).
e. Then all days spent in the UK since the start of the claim are added (B). These two figures are compared, and where (B) exceeds (A), there will be a failure in the claim
period.
f. The claim period ends on the previous return date.
g. After this, a new claim period must commence from the earliest possible date of leaving the UK.
2. A Valid Foreign Port For Each Employment, 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/gas installation outside the UK and the designated areas of the UK continental shelf can be regarded as beginning or ending at a foreign port.
3. Employment Must Be Aboard a Ship.
A seafarer is, of course, someone who works on a ship. There is no actual, exact definition of a ship in tax law, but ‘offshore installations’ are specifically NOT regarded as ships.
Due to a great deal of abuse of the exemption by non-seafarers, an amendment came into effect in 1998, which meant that the following vessels do not qualify for SED exemption:
- Fixed Production Platforms
- Floating Production Platforms
- Mobile Offshore Drilling Units
- Flotels
At this time, Crown Employees are not eligible to claim SED. However, employees of the Royal Fleet Auxiliary, although considered Crown Employees for tax purposes, are now eligible to claim the Seafarers Earnings Deduction due to the nature of the organisation.
For more information on all things seafarer, check out our sector page here.