Discover Your True Offshore Tax Position
If you work on a ship you may be wondering about the rules and regulations that coincide with the Seafarers Earnings Deduction and whether or not if you qualify for it. Within this special page, we will explain the details of the Seafarers’ Earnings Deduction program below. You will learn how it may or may not apply to you and whether or not you can receive this tax deduction. Just continue reading below to find out the full details.
To begin with you can only qualify for this special earnings deduction if you perform all of your work duties on a ship or if you perform most of your duties on a ship and other incidental duties that are related to duties on the ship. This may sound easy to understand but it gets a little more intricate with the legalities involved.
The actual word “ship” is not defined in the tax laws. However, “offshore installations” which are commonly used in the production of offshore oil and gas industries are identified and are not considered as “ships” in regards to the Seafarers Earnings Deduction program. This means that if you work on an offshore installation you are not entitled to the deduction. You may be wondering what constitutes an offshore installation when it comes to the law. We have listed the following descriptions below but this is not in itself legal advice.
An offshore installation is considered as
- Floating production storage and offloading vessels are also known as FPSOs
- Production platforms that are floating
- Production platforms that are fixed
- Storage units that are floating
- Mobile offshore drilling vessels including drillships, semi-submersible and jack-us)
- Also Flotels
If you happen to work on an offshore installation anywhere throughout the world you are not considered to be a “seafarer” under the purposes of the Seafarers Earnings Deduction program so unfortunately, these workers cannot take advantage of the tax relief. Neither can those who have been ashore and worked on foreign soil. So expatriates who may have left the UK to go Down Under and move to New Zealand from UK, or even Australia, do not qualify.
So what exactly is considered a “Seafarer” in regards to this program? A Seafarer is a person who is employed on a vessel that is actively engaged on a voyage or partial voyage which begins or ends outside the UK and travels outside of the UK. In this situation, the North Sea is also considered to be a part of the UK.
How to qualify for the deduction program
Quite simply, if you have been on more than one employment in the qualifying period of time when you have performed your employment duties outside of the UK. A qualifying period of time is considered for the time spent outside of the UK. A day is considered when you are outside of the UK in a 24 hour period with the day ending at midnight, as long as you are outside of the UK. When you spend days that are outside of the UK and are not working then these days are considered days of absence. There are a few more details we will explain below in what exactly counts towards a qualifying period if you are on a return visit to the UK. We will explain how this impacts you and your ability to receive this deduction:
- to begin, to have your time counted under the qualifying period your visit cannot last more than a total of 183 days long.
- the full number of intervening days you spend in the UK can be no more than exactly half of the number of days you spent abroad from the first day abroad to the last day you spent.
- intervening days are only counted between periods of absence from employment.
Being an employee that works outside of the UK on a ship may entitle you to the seafarers discount which will help to reduce the taxes that you are required to pay. As long as you meet the requirements of having worked on a ship outside of the UK for a long enough period and are a resident of the UK you will be able to receive this specialized discount. We recommend that you keep records related to your offshore employment to have an easier time filing for the discount. It is a helpful deduction and if these rules and requirements relate to you then, by all means, take advantage of the Seafarers Earnings Deduction to get the tax relief you deserve for your employment on a ship. For further information, speak to HMRC or a qualified accountant for more information on how this deduction may or not apply to you.
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