The Seafarers Earnings Deduction - The Smart Approach to Tax

  • Patrick Maflin
    Patrick Maflin

At some point in your career in yachting you will have to address your tax situation. Some people wait years before they decide to face facts, but ultimately it is something that cannot be avoided forever. In 2008 I took a step into the unknown and started the process of filing tax returns. At the time there was little to no information available online as to how the process of filing a tax return as a seafarer actually worked.

The preceding weeks before my returns were finalised were very fraught, as I feared that I would be presented with a large tax bill. My accountant at the time did little to ease my nerves as he provided me with virtually no information on the process. On the final day when I received my completed returns and discovered that I had qualified for the Seafarers Earnings Deduction (SED) for each respective year in yachting and thus owed no tax, I was in a state of disbelief!

Nine years have passed since I first started filing tax returns as a seafarer and yet as a company we still find that very few UK/EU resident crew take advantage of the unique tax position they are afforded. In our opinion the first reason crew choose not to file tax returns is that they are making decisions based on the advice from their peers who may not always be the most informed. The culture of the industry lends itself to tax avoidance, as many believe that tax is something that can be avoided simply by choosing to bank offshore & become non-resident. Admittedly tax can be avoided, but crew need to recognise that the only way to truly do this is by filing an annual tax return and claiming the SED.

Secondly crew do not understand how simple it is to address this common problem and instead fear that they will be taxed and receive large penalties from HMRC for not filing. In our experience the only time that crew receive penalties is if they begin the process of filing and then choose to ignore it.

Broadly speaking if you wish to qualify for the SED, you need to have worked onboard a yacht for a year, spend less than 183 days a year in the UK, be employed not self-employed and not have permanent residency outside of the UK. It really is that simple, however if you read any of the guidance notes online provided by HMRC it seems far more complicated.

If you wish to use our services to file your tax returns we guarantee a smooth and painless process from start to finish. You can also backdate returns up to a maximum of 6 years if you have UK sourced income to declare. We require the following information to complete your tax return(s):

    -Number of days spent in the UK in each given year. (We do not require copies of your discharge book or flight ticket stubs)

    -Amount of money earned

    -Employer or Management Company address

Once we have this information we can complete your tax returns and you can stop looking over your shoulder and worrying. Mortgages and other financial services will also become much easier to access. It is amazing how many clients come back to us after they have filed, questioning why they waited so long to do so. If you think that you meet the criteria for the SED, or would like to find out more information please contact us; our initial consultation is free:

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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.