Work Tax Free Offshore with HMRC’s Seafarers Earnings Deduction

Income Tax Is a Thing of the Past If You Work At Sea

Within this article, we would like to let you know about an excellent piece of tax legislation that is being offered to United Kingdom citizens who work as seafarers.

This tax law came into effect as of the 1988 Finance Act and it still to this day is not very well known or spoken of. Many thousands of people will qualify for this exemption and we will give you the full details as of how to take advantage of it and whether or not it applies to you.

As of 2012, the Seafarers Earnings Deduction became a 100% tax exemption for those who happen to be employed in foreign waters around the Earth. Many people who are entitled to this excellent tax exemption do not harness it and some do not even know of it.

It is not well known and the details about it in the information provided by the HMRC is very vague and not very informative. We have dedicated this article to help you understand the Seafarers Earnings Deduction and if you can take advantage of it and get all the benefits of not paying taxes by using it.

Working on a Yacht Offers a Great Quality of Life. Image credit: Work On A Yacht

There are certain rules and regulations that must be followed firstly in order to take full advantage of this tax deduction. Not all United Kingdom citizens in the seafaring industry are able to use this tax exemption.

The current version of the Seafarers Earnings Deduction came into being during the Finance Act of 2012 because of battles fought between the HMRC and seafaring trade unions. The SED is a great method that helps United Kingdom citizens earn more money and have fewer issues with the competition and global markets related to the seafaring industries.

This law was also created to help the UK defence needs by having more UK citizens in different foreign ports and international waters. Even though this piece of tax law was created in part for the defence of the UK it cannot be harnessed by those employed by the military.

The seafaring unions continue to battle over this fact and one day the laws may change yet again to include military personnel.

While we look at the HMRC 205 Helpsheet it looks and feels like it has been written in an unintelligible language and trying to make sense of it can be difficult. The details, rules, and regulations of the HMRC do not actually explain what exactly is considered a ship.

It just states you must work on a ship to qualify for this tax exemption.

What is not actually considered a ship has been listed as the following as floating and fixed production platforms, flotels as well as mobile drilling platforms. If you are employed on one of these types of vessels this tax exemption will not apply to you.

There is a lot of misinformation about this tax break and many people do not know of it or use it. Some individuals will choose to not file their annual tax return and may face severe penalties and fines. While others may choose to set up a corporation within the UK or set up a business in other countries to pay fewer taxes.

If they understood they could apply for the Seafarers Earnings Deduction imagine the benefits they would be able to access! If you don’t file your taxes or don’t take advantage of this tax exemption you could be making a serious mistake.

Understanding the SED Rules is Vital to Income Tax Exemption

Another reason people may not file their taxes or use this tax exemption is that they do not understand how much time they are allowed to spend in the United Kingdom. With the Seafarers Earnings Deduction, you are allowed to spend 183 days ashore within the UK per given tax year.

A day in the country is considered if you were in the country at the beginning of the day until midnight of that day. You will need to keep all records and stubs that prove your time spent in the UK. If you spend longer than a 183 days per taxable year then you would not qualify for this tax exemption.

For complete clarity, anyone who has been outside the UK to work on foreign soil cannot use this exemption at all. So if someone is moving to Australia from UK to live and work, don’t think you can live out a tax free life by claiming under the SED – you can’t!

Another rule is that you must embark or disembark from foreign ports to qualify. You cannot leave port or return to port in the UK if you want this tax break.

The HMRC rules and regulations are slightly complex but the Seafarers Earnings Deduction is a great tax exemption. Be sure to file your taxes because you will need a SA302 letter if you ever want a mortgage or loan. If you can use this tax break then use it today!


The author acknowledges the following third party sources for material used including text, images and references: