ONBOARD Magazine summer 2021

CREW TAX
UK Tax legislation for
seafarers’ earnings
Michael Garner
looks at the Seafarer’s
Earnings Deduction
for UK mariners
and reminds us that
it really is not that
complicated, but a
very necessary step
for UK crew to take
We understand tax isn’t your
priority while working aboard
these luxurious vessels, let’s
face it, tax isn’t interesting at all! I would,
however, like to try and explain the most
common misconceptions and explain some
of the questions we are regularly asked.
As a seafarer you have access to a unique
piece of UK tax legislation, it must be one
of the best tax relief systems in the UK
but, to qualify, the criteria are quite strict.
The Seafarer’s Earnings Deduction (SED)
is an area of UK tax legislation that allows
seafarers the right to claim up to 100%
tax exemption on their earnings.
Seafarers’ Earnings Deduction in brief
First and foremost, you must have:
• worked on a ship
• worked outside the UK long enough to
qualify for the deduction - the claim
period must be a minimum of 365 days
• a UK National Insurance number
You can’t get the deduction if you are not
a UK resident.
We very often come across seafarers who
are aware of the legislation yet believe
that, because they do not pay tax at
source, there’s no need to file a tax return
because they fulfil the SED criteria anyway.
Irrespective of this, if you are receiving
untaxed income, that must be declared
to HMRC.
One major stumbling block you might come
across in the future is when you apply for a
mortgage or loan; lenders frequently want
details of earnings declared to HMRC. If
income hasn’t been declared…your chances
are slim at best.
The tax system is a complicated issue
and as we have found out ourselves, the
predicaments some of our clients have
found themselves in for ignoring their
own tax obligations to the UK, whether
income tax or National Insurance, have
been somewhat messy.
Taking this view of the system will have
consequences. Failure to file a tax return
under these circumstances can lead to
penalties or fines from HMRC without
consideration that no tax was to be paid
in the first place. You must declare your
untaxed income to HMRC.
Why you should act now
Whatever your employment within
this industry, qualifying crew have the
opportunity to clear their tax liability in
full, showing transparency of your income
tax affairs to the tax authorities and as a
result being able to prove to the taxman
that you owe him nothing.
We have found that it is mostly the
seafarers working on board private yachts
and subsequently receive their income
gross that aren’t in the tax system.
Understandably they think as they’re out of
the UK for long periods they don’t need to
report their income. However, as we are
more aware of the Automatic Exchange of
Information (AEOI), the banking industry is
becoming more open in sharing information
with foreign authorities, so never has it
been more important to keep your tax
affairs fully up to date.
Therefore, it is those who fail to act that
are more at risk from a tax investigation
even if their income is more than often
tax exempt.
What are you waiting for
At SK Tax Service, we have been fulfilling
British seafarers’ tax obligations for over
30 years and fully understand the rules
and regulations surrounding the SED.
We are also able to help bring your National
Insurance Contributions up to date. Keeping
your NICs up to date will also protect your
future state benefits and state pension.
If you would like to discuss your personal
situation please contact me:
michael@sktax.co.uk
or visit www.sktax.co.uk
ONBOARD | SUMMER 2021 | 159