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Seafarers Earnings Deduction: Tax Relief for Yacht Crew

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.

Yacht crew commonly file under seafarers earnings deduction rules. Photo: FreeImages.com

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. 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.

Keeping copies of payslips and records is vital when working offshore. Photo: Visual Hunt

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.

Acknowledgements

The author wishes to acknowledge the following external sources for use of links, reference material and images:

Cat A vs Cat B Office Fit Outs

What is an office fit out?

When it comes to defining different types of fit outs, one cannot be very specific. The reason is that one type of fit out can include some finishes, which for someone else would typically fall under another fit out category. Therefore the most standard definition that can be offered in the field of commercial building fit outs is the Shell and Core fit out, Cat A and Cat B fit outs. The former typically refers to a building’s shell – there are no additional features and amenities other than the basic framework of the building.

The Differences Between Shell & Core, Cat A & Cat B Fit Outs: Image credit: Oktra

Cat A and Cat B go some steps further, and this is just what we shall be discussing hereunder.

What is a Cat A fit out?

This is quite a basic form of fit out too. It goes a bit further than Shell and Core as besides the concrete and metal framework, this type of fit out will also include certain electrical services, suspended ceilings, toilets, and some basic finishes. In the case of a commercial building one would expect to find industry standards compliant fire detection systems, the internal walls, the lift, the lobby and reception area also completed.

What is a Cat B fit out?

In this type of fit out we go beyond a Cat A fit out. This is because there will also be several other finishes with the aim to make the space more unique. So there will be discussions about the type of style and how to achieve it. As a result this type of fit out will include the floor finishes, the doors, any partitions, the lighting facilities, any equipment that will need to be installed such as air conditioning and audio visual equipment, as well as the furnishings. Thus a Cat B fit out will make the building complete, inside and outside.

Deciding which fit out is best

There will be conflicting ideas as to which type of fit out one will opt for. Needless to say, different people will have diverse preferences. Some will want the building to be completed from a to z, so that they will not need to worry about anything. The developers will be entrusted to finalizing the commercial building both in terms of the exterior as well as the interior finishes. The price will obviously be higher as there is so much that will need to be seen to. However the lack of stress and hassle in seeing to the works in progress, acquiring materials and hiring different service providers to see to the various jobs, might ultimately pay off for the higher price of a Cat B office fit out.

On the other hand there may be clients who are obsessed with realizing their business’s brand image in a specific way. In such a case they would prefer to monitor and administer the interior decor and finishes on their own. This is where a Cat A fit out would make more sense.

Reactive Maintenance vs Planned Preventive Maintenance

Which commercial maintenance plan suits your business?

When you own a building, you do not just buy it and use it for your business operations. You also need to maintain it and its contents in good running order. A commercial building or an office will include several pieces of equipment and machinery, which need to be maintained in good condition. Just imagine failing to retain your machines, equipment, computers and other assets in proper condition. The result would be that you lose hundreds or thousands of dollars within a few years’ time. You would need to replace these items, as otherwise you will not be able to continue operating either. So, it is evident that maintenance is simply imperative and it needs to be carried out every now and then.

There are in fact two main types of maintenance, namely, reactive maintenance, or planned preventative maintenance, sometimes referred to as “proactive” maintenance. We shall be discussing the differences between these two types of maintenance in commercial offices and buildings in more detail.

The Vicious Circle of Reactive Maintenance. Image credit: STR Software

What is Reactive Maintenance?

Reactive maintenance refers to the maintenance that is carried out only when a machine or piece of equipment breaks down or develops some sort of fault or error. Reactive maintenance is thus often referred to as breakdown maintenance. The main intent is to restore that piece of equipment or machine to its normal condition so as to regain operation as soon as possible. This will include repairing faulty parts or components, or replacing them.

What is Preventive Maintenance?

Preventive or proactive maintenance is an approach which, as the name itself implies, makes sure that repairs are avoided by being proactive. Certain maintenance procedures will be carried out on a regular basis in order to minimize the possibility of faults and the need for reactive maintenance.

5 Key Metrics that Affect Operational Efficiency. Image credit: CVP

What approach should your business take?

Needless to say, there are different reactions and opinions to the type of maintenance that one should choose. Some feel that the best option is to be proactive, as apart from saving money in the long run, one would also be increasing the life span of the assets as well as guaranteeing efficient productivity as breakdowns can be avoided. Others feel the reactive maintenance makes more sense since it is less time consuming than reactive maintenance, and there will be no need to excessive or useless maintenance being carried out at regular intervals which again, can be expensive.

Obviously both of these approaches have their respective pros and cons and it is not easy to choose between the two. There are various factors to take into account, including costs and time involved.

Establishing a clear and regular maintenance routine sits well with those who have a large commercial building or office, where there are dozens of computers, machines and equipment. With a regular evaluation being carried out, there will be a proper amount of time allocated to each machine. The evaluation will be carried out with the intention of checking the various components and ascertaining areas that require fixing, replacement or repair, so as to prevent the machine from breaking down in the near future. Preventive maintenance helps to divide the maintenance tasks over a period of time, and this makes the process a bit easier and less problematic.

For instance, one will schedule an inspection of all computers on the ground floor during January, machines on ground floor during February, and equipment on ground floor during March, and then proceed in a similar manner for the subsequent floors. In this way the tasks will be carried out at a leisurely pace, unlike the pressure involved when breakdown maintenance has to be carried out as quickly as possible. Preventive maintenance will also help to pinpoint problems and resolve them in a cost effective manner, thus reducing chances that these will become unmanageable and beyond repair in the future. So a well-rounded maintenance strategy will have these advantages. However, it is also rather difficult to execute since there would need to be the proper amount of time, skill and expense involved in carrying out on a regular basis.

On the other hand, with a Reactive maintenance approach, one would be focusing on repairs only when problems arise. This requires fewer staff as most repairs will simply be outsourced. There is no need for planning, or to employ technicians for such tasks either. However, with reactive maintenance there would be the problem of having to rush the repairs so as to try to continue operating. Unless repairs are carried out quickly there will be a loss in productivity which leads to a loss in sales as well as other expenses. Repairs may end up being very costly, and chances are that the problem ended up being aggravated and thus more expensive to resolve. There may also be safety issues, and generally speaking the life expectancy of assets is reduced with such an approach.

The decision as to which approach to take will depend on various things, and ultimately it is a matter of preference. However it is important to be aware of the differences between the two approaches so as to try to choose the one which strikes the best balance between costs, efficiency, productivity and convenience.