Seafarers Earning Deductions, or SED for short, is UK tax legislation which allows individuals who work offshore to claim tax relief on earnings made outside of UK waters.
Although it sounds straightforward, qualifying for SED depends on a multitude of factors, and working out how much you are due back can be challenging to those who are unfamiliar with the legislation. Lots of seafarers overlook declaring their income for this reason and lose the ability to claim tax back.
UK seafarer tax is always thought of as a complicated issue, but it needn’t be any longer, with our helpful guide on common questions often asked by individuals who want to make a claim.
How do I make a claim?
To be in a position to claim SED, seafarers must first complete and file a tax return by the 31st January each year. You can complete the process yourself, but with the complexity of the legislation, it is recommended to seek advice from international tax experts who operate in the maritime sector.
- You need to be able to confirm your income for the previous tax year (6th April to 5th April the following year).
- You should also be able to give details about your employer. We will need to confirm the name of the ship or vessel, so it is a useful exercise to record your place of work along with the name and address of the management company you work for.
- We will also need to confirm the amount of days you have spent in the UK. You have an allowance of 183 days per year which enables you to claim 100% tax back.
What happens if I have spent more than my allocated 183 days in the UK, can I still claim for SED?
The short answer to this is yes, however, a half-day rule needs to be applied. The half-day rule is satisfied via an equation and the outcome is influenced by how many consecutive days you have spent in the UK.
This is where the application becomes complicated and we would advise getting in touch and speaking with our tax experts if it applies to you.
What if I work in UK waters?
If you work inside UK waters, the days working inside will only count towards your 183-day allocation if you are still inside UK jurisdiction at midnight. So if you work inside the boundary during the day but stay outside at night, it does not count towards the quota as long as you are outside the 12-mile limit.
To prove this it is useful to obtain a signed letter from your captain or senior manager declaring your position at midnight.
Is there anything I should be doing now to make my claim more straightforward?
Although not mandatory, there’s a number of records which you can start to keep in a safe place, including:
- Your seaman’s discharge book – This will help you to confirm when you were on a vessel and the location.
- Payslips and bank statements – These important documents prove exactly how much you have earnt throughout the year allowing you to make an accurate application.
- Flight confirmation – This used to include ticket stubs, but as technology has advanced, boarding cards have become electronic. Keep an electronic copy of them along with other flight information such as the booking confirmation.
I’ve worked both onshore and offshore, can I still claim Seafarers Earnings Deduction?
The answer to this is yes, if you have worked in the UK for less than your allocated time then nothing changes. You are entitled to earn £11,850 (2018/19) or less in the UK tax-free.
I’m a resident outside of the UK, can I claim?
Yes – as long as you reside somewhere in the EU. EU residents are entitled to exactly the same as a UK resident, just be sure you can prove your whereabouts.
Binks Overseas have a wealth of international tax knowledge within the maritime industry, built up over almost 20 years. We help our clients claim 100% tax back, get in touch today.