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HMRC’s Seafarers Earnings Deduction: Tax Exemption Yacht Crew Should Always Use

How British Can Stop Paying Income Tax If They Work Offshore

To begin with, there are certain rules and regulations that must be met in order to take advantage of this tax exemption.

Not all UK citizens employed in the seafaring industry will be able to use this tax break. It came into its current incarnation as of the Finance Act of 2012 due largely in part to a battle fought between the HMRC and seafaring unions. What it is today is a great way to help UK citizens earn more money and have an easier time at competing in the rather competitive global job market.

This law was originally introduced to alleviate the competitive nature of the industry as well as for national defence needs through having United Kingdom citizens in foreign ports and waters.

Although this piece of tax legislation was created in part for defending the country, unfortunately, it cannot be utilised by those employed in the military who may spend time in foreign waters. The seafaring unions are still in battle over this and hopefully one day those employed the military who spend time at sea will be able to qualify.

When looking at the HMRC 205 Helpsheet it looks like it is written in an unintelligible language and understanding it can be difficult.

To outline the rules and regulations the HMRC does not actually explain what constitutes a ship. In order to take advantage of this tax exemption, you must work on a ship. What is not considered a ship is noted as the following, floating and fixed production platforms, flotels, and mobile drilling platforms.

Working on a yacht offers a great lifestyle as well as tax free earnings. Image credit: Charter World

If you work on one of these types of units then you will not be eligible to receive the Seafarers Earnings Deduction. Some people will not take advantage of this tax break and will choose to not file their annual tax return and may face severe penalties and investigation. Other people may choose to start limited companies ashore or companies in foreign countries to try and pay fewer taxes.

If you are eligible for the Seafarers Earnings Deduction you truthfully cannot lose by harnessing this tax exemption. If you were to pay taxes through a limited company or fail to file your annual tax return would be a mistake.

Another reason why people don’t access this tax exemption is that of how many days they spend ashore in the United Kingdom. With the Seafarers Earnings Deduction you are allowed to spend a maximum of 183 days within the United Kingdom.

A day is considered if you are in the country from the beginning of the day until midnight that day. You will have to keep a hold of all paperwork and stubs that prove your time spent in the United Kingdom. If you were to choose to stay longer then 183 days within a taxable year then you would not qualify for the tax exemption.

Another rule that must be met is that you must embark or disembark from a foreign port to qualify for this exemption. This means you cannot leave port or return to port within the United Kingdom if you want to be able to access the tax break.

So if for whatever reason you may have left the country to move to Canada or any other foreign soil, this does not qualify you.

The rules of the HMRC are complex which puts most people off from accessing the SED. It is a great law that allows you to keep all money earned in foreign waters. If you were to not file your earnings would be a huge mistake and not worth the investigation or penalties that are sure to follow. Ultimately you will need to file your taxes if you ever want to borrow from a lender or get a mortgage. They will ask you to fill out a SA302 letter which can only be done by filing your taxes.

The Seafarers Earnings Deduction is a great tax law and should be utilised if you meet the criteria above.


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