Claim 100% Tax Free Income with Seafarers Earnings Deduction
Many people who happen to be employed as a seafarer in the United Kingdom may be able to take advantage of an excellent piece of tax legislation that allows those that qualify the right to claim a 100% tax exemption on all foreign earned income. This tax exemption is known as the Seafarers Earnings Deduction and it happens to be the result of nearly 15 years of a legal battle involving the HMRC and the seafarers trade unions of the United Kingdom. A final agreement was reached in 2012, however, the seafaring unions are still hoping to extend the availability of this exemption to include members who are employed in the armed forces. This tax exemption was first put into legislation 19 years ago back in 1988 and still to this day many people do not know of the Seafarers Earnings Deduction and may not use it. Within this report, we hope to share with you the details on how the Seafarers Earnings Deduction works and whether or not you can apply and use this special piece of tax law.
The first version of the Seafarers Earnings Deduction first came into law for a number of really good reasons. The first was because seafaring employees spend a lot of time outside of the United Kingdom and have to deal with a very highly competitive global job market. Also, this law was passed to put more UK citizens in foreign waters and ports to help serve with the defence needs of the United Kingdom. The job market is incredibly competitive in the seafaring industries and HMRC wanted to make it more beneficial to those that live in the UK. Also, it helps with defence needs as we stated earlier although this tax exemption does not apply to those employed by the military.
This tax exemption was created to help UK seafaring employees but unfortunately, many people and crew members do not take advantage of this tax break or even know of it. The Seafarers Earnings Deduction can be incredibly hard to understand when you read the information available in the HMRC. We have decoded Help Sheet 205 and have reviewed it and have these details to give you. To begin with, the HMRC does not state what a ship is, but you must work on one. But what is not classified as a ship are listed as follows, Fixed production platforms, floating production platforms, mobile offshore drilling units as well as flotels. If you work on any of these types of vessels you will not have the Seafarers Earnings Deduction apply to you.
Some seafaring employees do not completely understand the law or rules and regulations and may choose not to benefit from the SED. In the seafaring industry, there are two common personality types on how they deal with their taxes. The first group of people will open a corporation or business in the UK or in another country to save on taxes. While the other group of people may choose not to file a tax return which is a big mistake. If you are able to apply and use this tax exemption then take advantage of it.
Many people do not use this tax exemption because of the issues regarding how much time you may spend ashore. Under the rules, you may spend no more than a 183 days ashore per year. A day is registered if you were ashore during that day and at the end of the day at midnight. You will need to keep all paperwork, stubs, and receipts that prove you were ashore for only a 183 days. If you are ashore over 183 days then this tax exemption will not work for you. You need to keep all forms of paperwork to prove you were only ashore for the maximum number of days.
In order to qualify for days at sea, you must embark or disembark from a foreign port. This means that you cannot embark or disembark from the UK. If the HMRC would make this tax exemption more understandable I believe that more people would take advantage of it. It is very important to declare your income as with the Open Exchange of Information the government can find out your tax details anyways. If you don’t declare your income you will not be able to do much with it. If you wanted to take out a mortgage or a bank loan you would not be able to because you would need a SA302 letter which is only available if you do your taxes.
The Seafarers Earnings Deduction is here to stay and should be used if you qualify!
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