Frequently Asked Questions
In this section, the most common issues are addressed with regards to Seafarer's Earnings Deduction and seafarer's tax questions.
If you have a question that is not covered, please email us and your query will be dealt with as soon as possible.
Can I claim higher rate tax relief through Self Assessment on workplace pension contributions?
A guide on this subject can be found here
Do floating production vessels qualify for SED?
I am afraid not, any fixed installation like FPSOs FSUs or Flotels do not count as vessels for the purposes of claiming SED. Visit our section on the Pride South America decision for more detail.
Does dry docking of a vessel affect your claim?
It is possible for a ship in a dry dock to be regarded by HMRC as not being a ship for tax purposes. They consider that when a vessel is in a dry dock it can still be regarded as a vessel, BUT if the hull of the vessel is breached for any purpose then HMRC's attitude is that it then ceases to be a ship for tax purposes as it is not "capable of being used in navigation".
Therefore it is vital that you inform us if you are serving on a ship under such circumstances.
Does standing by a new build affect the seafaring allowance?
I am afraid that there is good news and bad news in my answer! The good news is that we can count the days out of the UK, standing by a new build abroad, in the build up of your claim. However, the bad news is that it is not possible to claim the seafaring allowance against the earnings whilst standing by. HMRC's attitude to this is based on the premise that whilst standing by a new build you are not "performing the duties of your employment on board a vessel". As far as HMRC is concerned, a new build does not become a vessel until the date of its first sea trials. At that point HMRC will consider that the vessel is "capable of and used in navigation" and so the seafaring allowance can be claimed from that date on.
How does attendance at college affect my claim?
Once you start college it is not possible to claim the seafaring allowance on those earnings as you are not "performing the duties of your employment on a vessel". It may be possible to maintain an ongoing claim by taking holidays abroad at the appropriate time, whilst you are at college but this does not alter the fact that the allowance cannot be claimed for this period. Individual circumstances can vary tremendously so it is always best to contact us sooner rather than later to find out how attendance at college will affect your tax liability.
Also, please bear in mind that it is not possible to claim tax relief on your expenses whilst at College, this allowance was discontinued back in 2000!
How many days' holiday per year can be included in the build up of my claim?
There is no statutory limit on the number of holidays that can be included in a seafaring claim. The law talks only of the number of days spent out of the UK, it makes no reference to whether these are work days or holidays.
I am resident outside of the UK, can I claim the seafaring allowance?
Following a ruling from the EU, from the 6th April 2011 anyone who is resident in a country in the European Union, or the European Economic Area, will be entitled to claim SED in the same way as a UK resident. Clearly there has to be a foreign port each year, and you have to spend sufficient time out of the UK, but this should not be a problem for you! Another point that you need to bear in mind is that HMRC will ask you to prove your periods of absence from the UK, so as well as evidence of the time out whilst on ship (see our section on "Working in the North Sea") you will also need to retain your flight tickets showing your return to your home country during your leave. Do bear in mind that the first refund you can claim under this ruling will be at the end of the 2011/12 tax year, that is after 5th April 2012, but you need to start retaining the evidence now to make sure that you can claim from the start of this tax year, 6th April 2011.
If I have another job, in the UK, will this affect my claim?
No. Your claim is determined solely with reference to your dates of entering and leaving the UK. A second employment does not affect the claim in any way. Obviously, we will need to declare any such income on your tax return as this can affect your overall tax liability. It should be borne in mind that for any tax year where you clear your liability because of a seafaring claim, the allowance does not extend to any other income; however, it can mean that your personal allowances can be offset against that other income and this can lead to a refund of some or all of that income tax as well. So it pays to keep us informed!
Someone told me that the leave you have after a claim also counts as qualifying days, is this true?
The simple answer is NO! When we come to settle your tax affairs for a year in which your seafaring claim has ended, we can look to claim the allowance for the period of voyage leave taken immediately following a successful claim. However, we cannot use those leave days in the calculation of your claim. Your seafaring claim is determined solely with reference to your dates of entering and leaving the UK.
What is abroad for the purposes of taking leave abroad?
I can confirm that the Channel Islands, the Isle of Man and the Republic of Ireland all count as outside the UK. However, do bear in mind the need to retain plenty of evidence to support these claims, particularly where you are going somewhere that is close to the UK, in terms of travel time. The most difficult cases we have found to prove are those people who live in Northern Ireland and spend leave in the south in order to boost their days out. If you are going to do this then please don't just go 100 yards over the border, because how the heck do we prove that?? Please check out the answer to "How do I prove a holiday abroad?" in FAQs
What is the definition of outside the UK for SED?
A qualifying day is one in which you are absent from the UK at midnight. Under normal circumstances HMRC regard being outside the twelve mile limit as outside the UK, however, by concession they are prepared to accept that where a vessel leaves its UK berth before midnight and goes to a foreign port, then that is a day out. BUT if a vessel sails from a UK port to another UK port then it is only when the vessel is outside the twelve mile limit at midnight, that it is regarded as outside the UK.
What sort of evidence do you need to prove a holiday abroad?
Ah, the old 'How long is a piece of string' question! Unfortunately the tax office does not give a precise definition of what is required to prove holidays abroad. I prefer to answer with a question and say 'If you owed your next door neighbour £5,000 because he had a week's holiday in the Channel Islands, what evidence would you ask to see?' This tends to concentrate people's minds on this tricky subject!
In simple terms it is best to provide at least airline or ferry tickets to prove your dates of travel, ideally with bank/credit card statements showing transactions made abroad. These prove that you were actually out of the UK on those dates. The problem is that the travel tickets themselves are not absolute proof that you spent the claimed amount of time out of the UK. You have to appreciate that people have been caught in the past claiming to have spent time abroad when in actual fact they either never went at all, or travelled out and back on the dates claimed but did not stay out of the UK for the whole period. You have to bear in mind that the emphasis is on us being able to adequately prove your time out, it is not up to HMRC to disprove it.
When do I need to submit my tax return?
You may be aware that the time limit for submitting a tax return is the 31 January following the previous 5 April. So this gives us some nine months to complete and submit the return for you. In order for us to be able to guarantee that your return can be submitted in time we ask that you send all the details for your return to us by mid-December. If the information is not made available to us by then we will do our utmost to submit your return in time, but we cannot guarantee this.
When is a ship no longer a ship for the purposes of SED?
The information we have from HMRC is that they consider a vessel to cease being a vessel for tax purposes, on the day it goes into dock to undertake conversion to an FPSO.
Even though the FPSO then sails itself halfway round the world to its permanent location, HMRC does not regard it as a vessel for SED purposes. Their argument is that to be considered as a vessel, it is necessary to consider the function of a vessel as well as its abilities. Therefore they consider the FPSO is not a vessel, despite its ability to sail itself round the world, because its function is to operate as an FPSO.
As always, any HMRC interpretation is open to challenge but this would involve a court appearance with its extremely expensive legal charges.
Why does everyone go on about the anniversary date of a claim?
..I have been told that I have to be out of the UK on that particular day, is this true?
The fact is that the anniversary date plays no part in your seafaring claim. It is not and never has been one of the rules for qualifying. The only relevance that the anniversary date has is that a new claim has to extend over a minimum of 365 days. It is not one of the criteria that you are outside of the UK on that particular date. As long as you keep within the half rule each time you return to the UK then there is no problem.