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Can I claim SED if I work on a ship in the North Sea or UK waters?

Unfortunately in order to claim seafarers earnings deduction your duties must be performed wholly or partly outside the United Kingdom. The North Sea has been classed as a ‘designated area’ by HMRC and is treated as being part of the UK. It is also worth noting that the legislation is silent as to the amount of duties that will satisfy the condition. 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. This is regarded as ending outside the United Kingdom and the return voyage will be one that begins outside the United Kingdom.

Do I need to be out of the UK on my anniversary date?

You may have heard seafaring colleagues say that you need to be out of the UK on your ‘anniversary date’ which refers to the anniversary of your first date out of the UK. Ignore this completely! The ‘Anniversary date’ has absolutely nothing to do with seafarers earnings deductions and never has. 

Do floating production vessels qualify for Seafarers Earnings Deduction?

No fixed installation like FPSO’s FSU’s Flotels do not qualify as vessels for SED, they are specifically excluded by HMRC.

Does standing by a New Build count for the SED claim?

The short answer is it depends on whether the vessel has undergone its first sea trials. In the Court of Appeal judgement of Perks V HMRC it was held that in order to be considered for SED then a vessel or structure must be capable of navigation. For the purposes of claiming SED it is therefore not considered a vessel until after the date of the first sea trials.

If you are standing by a vessel before the first sea trials date then these are still tax qualifying days to use towards an eligible period. Unfortunately the income gained during this time however will remain taxable and you can not claim seafarers earnings deduction against it. 

Does Dry Docking of a vessel affect my claim?

Again it depends! HMRC consider that the vessel stops being a vessel as soon as it stops being capable of being used for navigation. So in general if the hull is breached then it is no longer considered a vessel for the purposes of SED. Therefore you couldn’t claim tax relief against your income during this time. If the hull isn’t breached and the vessel is ‘capable of being used in navigation’ then you can still claim full tax relief.  

If I have to go to college to study or attend courses can I still claim?

When you attend a College you’re income during this time will be subject to tax as you are not earning this income for performing the duties of a seafarer onboard a vessel. 

Can I count holidays abroad towards my Seafarers Earnings Deduction Claim? 

Yes all periods spend out of the UK are considered tax qualifying days and there is no limit on the amount of holiday days that can be used towards supporting your claim. 

Does HMRC consider the Channel Islands, Isle of Man and Southern Ireland abroad for Seafares Earnings Deductions? 

HMRC consider the Channel Islands, the Isle of Man and Southern Ireland as outside the UK for UK Tax Law. Due to their close proximity to the UK it is likely that HMRC will scrutinise your claim if you use holidays in these locations towards your SED claim. Remember you must retain as much proof as possible for all foreign travel to support your claim in case you are audited.

What is ‘outside the UK’ for SED?

If you are absent from the UK at midnight then this is a tax qualifying day. For tax purposes this means being outside twelve mile territorial waters limit. However if you are departing to or arriving from a foreign port then your vessel is considered as being out of the UK as long as it is not berthed in a UK port at midnight. Finally it is worth remember if your are sailing between two UK ports then you must be outside the 12 mile territorial water limit at midnight to achieve a tax qualifying day. 

Do I need to keep evidence that I went on a holiday abroad? 

Yes, you must retain as much evidence as possible in order to support your claim. Unfortunately there is no definitive list of what is required and each is examined by HMRC individually. In general as an absolute minimum it is recommended that you retain the following wherever possible: 

  • Airline or ferry tickets/boarding passes. 
  • Your credit card/bank statements showing foreign transactions.
  • Accommodation/holiday booking receipts in your name.

When do I need to submit my tax return?

The deadline for submitting your tax return online is the 31st of January on the year following the tax year end. For example the tax year 2017/2018 ends on the 5th April 2018. You therefore have until 31st January 2019 to submit your online self assessment return.