Self Employed & the Seafarers Earnings Deduction

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The Seafarers Earnings Deduction is commonly misunderstood amongst crew due to its complex nature and remains one of HMRC’s best kept secrets.

Crew often believe that because they do not have a contract of employment, they cannot claim the SED.

Instead, they find themselves filing tax returns as self-employed and missing out on a 100% income tax exemption.

Whilst it is true in some cases that the SED cannot be claimed, this article explores the circumstances under which you are able to claim the SED without being a contracted employee, potentially saving thousands in income tax.

Read on to find out more or click a jump menus below to skip to a chapter that interests you.

Chapters

1. Employment Circumstances
2. Questions to Clarify Your Position
3. Already Filed Your Tax Returns?
4. What To Do Next
5. Speak to Us or Comment!

Employment Circumstances

If you are working on a vessel and are not under a contract of employment, it is likely that you are invoicing the Captain, management company or the vessel directly for your work whilst onboard.

Although these circumstances may sound like you are self-employed, the unique nature of working at sea may mean that your circumstances are similar to those of an employee if you were working onshore.

As a result, HMRC would look to treat you as an employee for tax purposes if your circumstances are similar to those of an onshore employee, thereby permitting you to claim the SED and wave goodbye to large income tax liabilities.

It is difficult to assess every unique set of circumstances without consultation.

However, the below questions can act as a good indicator of your status.

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Questions to Clarify Your Position

If any of the following questions apply to you, you would be treated as self-employed for tax purposes and therefore are not eligible to claim the SED:

• You agree to do the work, but you can send someone else to do the job for you, for instance, a builder who can send another person with similar skills in their place.
• You probably have several customers at the same time. You can do the work how, where and when you like, for example, a writer who agrees to write a book and can write whenever they want to, as long as they meet the deadline set by the contract.
• You run a business and take responsibility for its success or failure, such as a joiner who has to redo unsatisfactory work and cannot charge the customer for the time spent redoing the work.
• You provide the main items of equipment or specialist tools you need to do your work, such as a pick-up truck, or scaffolding.

If you find that none of these questions apply to your work, you may be eligible to declare your income under the SED rather than as self-employed.

Get in touch with one of our skilled advisors today for an individual assessment of your circumstances.

Already Filed Your Tax Returns?

If you have been proactive and ensured that your tax affairs are up to date, you may think that there is nothing that you can do to rectify this.

However, it is not too late to claim the SED, even if you have already filed your tax returns as self-employed and paid income tax.

The deadline for SED claims is four tax years.

This means that up to the 5th April 2020, you can claim the SED in the 2015/16 tax year.

After this date the furthest you can backdate is the 2016/17 tax year.

If you have achieved qualification for the SED, the income tax that you have wrongly paid will be refunded by HMRC.

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What To Do Next

Are in a position where you think you are self-employed for tax purposes, but find that these tests do not apply to you?

Use our free SED test today to see whether you qualify for a 100% income tax exemption on your income from working at sea.

Speak to Us or Comment!

If you feel you have filed your previous tax returns incorrectly and should have claimed the SED, get in touch today to see how we can help rectify your tax returns and recover the income tax that you have paid.

Contact a member of our team today or let us know your thoughts in the comments section below.

Liked this article? Try reading:
Seafarers Earnings Deduction: The Most Frequently Asked Questions - Answered!

Any advice in this publication is not intended or written by Marine Accounts to be used by a client or entity for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party matters herein.