Are your duties as a Seafarer those which qualify for the SED now!
Or are they merely incidental !
You may not be able to rely on that one day’s trip a year into a foreign port for supplies etc to count and therefore qualify, as HMRC seek to show that this is not part of your employment duties on board ship!
The three key qualifying steps are:
1) 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) 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 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) Employment must be aboard a ship
A seafarer is someone that works on a ship. There is no precise definition of a ship in tax law, but “offshore installations” are specifically not regarded as ships.
HMRC’s Help Sheet 205 goes into greater detail about qualifying for the exemption, most notably the type of vessel you have worked on. Due to a great deal of abuse of the exemption by non-seafarers however, 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
Unfortunately, at the time of writing Crown Employees are not eligible to claim the Seafarer’s Earnings Deduction.
Hurdle number 4 – What trips can you claim for?
As yet there have been no court cases covering this and the legislation states that you can claim Seafarers Earnings Deduction for duties performed wholly or partly outside the United Kingdom.
This means that for the purpose of assessing whether a trip is performed wholly or partly outside of the UK the question asked is: does the journey either start or end outside of the UK?
Examples of journeys that do not meet this requirement include a fishing trip that starts and ends at a UK port, an oil field supply trip to or from a platform in UK sector of the North Sea, or a trip between platforms (The UK sector of the north sea is classed as being part of the UK for these purposes, but not for the “eligible period” calculation above).
The surprising thing is that HMRC seem to accept that you can claim Seafarers Earnings Deduction for the whole of the income from an employment in an eligible period provided that a least one of the trips begins or ends in a foreign port. Their guidance per the HS205 help sheet states (https://www.gov.uk/government/publications/seafarers-earnings-deduction-hs205-self-assessment-helpsheet): “Enter in box 11 the total amounts received in the year that were from an employment where you worked wholly or partly overseas”.
The key here is that the words used are “employment” and not “trip”, or “voyage”, and “partly”.
As the website https://seafarersearningsdeduction.co.uk/sed-explained/ states
“There is no minimum limit prescribed. Therefore, in order to be considered as working wholly or partly out of the UK it is generally held that during every tax year you must either:
- Complete a voyage or part voyage that begins or ends outside of the UK. In simple terms complete a voyage to or from a foreign port.
- Complete a voyage or part voyage to a rig while it is drilling outside of the UK territorial limits and outside a designated area. This is regarded as ending outside the United Kingdom and the return voyage will be one that begins outside the United Kingdom.
- Complete a replenishment at sea operation outside of the UK territorial limits and outside a designated area.