A guide to understanding the Seafarers Earnings Deduction

Eligible seafarers can significantly benefit from this tax deduction, use our guide to: 

• understand the eligibility criteria 
• learn how to maintain the necessary records 
• discover how to claim  

It is a difficult and complex tax deduction and, because of this, many eligible individuals may not be claiming tax relief they are entitled to. TaxAssist Accountants can assist you through every step of the process, ensuring you claim the income tax relief you are entitled to efficiently and effectively. 

What is Seafarers Earning Deduction? 

An income tax deduction from general earnings as a seafarer. While the deduction may be restricted this could be as much as 100% of your relevant income tax liability. It is therefore important to understand the rules and legislation, so you do not jeopardise your entitlement. 

You must have: 

• Worked on a ship (this includes working as a cleaner, entertainer or cook). A ship does not include offshore installations 
• Worked outside the UK for a minimum of usually 365 days 
• Been resident in the UK or resident for tax purposes in the European Economic Area (EEA) 

The deduction is available to UK resident employees where the following conditions are met: 

• the duties of the employment are performed wholly/partly outside the UK (the ship must dock at a foreign port) 
• the duties of the employment are performed in an eligible period 
• the earnings are not termination payments, disguised remuneration or employment related securities 

Any employment (other than Crown employment i.e. civil service and the armed forces) on a ‘ship’ may qualify for the deduction. This includes cooks, cleaners and entertainers on luxury liners. 

An eligible period must consist of at least 365 days made up of: 

• consecutive days of absence from the UK, or 
• combined periods of absence from the UK 

A combined period is where the employee has spent at least half their time absent from the UK and less than 183 consecutive days in the UK. 

To be absent from the UK, the employee must be outside of the 12-mile territorial limit at midnight. Any other days the individual has spent overseas (such as holidays) can also be included. The UK sector of the North Sea is treated as part of the UK. 

Once an eligible period has been achieved, it will continue until the individual spends 183 consecutive days in the UK or has spent more than half of their time in the UK since the eligible period began. 

If you are a Crown employee (i.e. Royal Navy sailor), not a UK resident and not a resident of an EEA state you cannot get the deduction. 

If the employee has more than one employment in the eligible period, they may only claim the deduction for those in which you performed duties outside the UK. If you have other employments with the same employer or associated employers, the deduction may be restricted. 

Examples of Seafarers Earnings Deduction 

1) A fisherman boards a ship from the UK and spends one week working in the North Sea outside UK waters and returns directly to the UK has performed all the duties in the UK throughout the period as it did not dock at a foreign port and the journey started and ended in the UK. 

The week counts as absence from the UK in building up eligible days, but the duties are treated as performed in the UK, therefore no Seafarers Earnings Deduction is available. 

2) A fisherman boards a ship from the UK which docks in Iceland for one day before returning to the UK. There is a foreign part to their journey and the eligible period would be wholly or partly outside the UK. A full Seafarers Earnings Deduction can apply for the whole period. 

Recordkeeping requirements 

You should keep the following information: 

• Working sheet HS205 
• Air tickets and travel documents 
• Hotel and other receipts 
• Passports and visas 
• Seafarer’s discharge book 
• Freeboard logs of the ships you carried out duties on 

How to claim Seafarers Earnings Deduction

If you are/were resident in the UK, you will need to register for self-assessment and complete a tax return including your details on the relevant section. You should include the names of the ships on which you carried out employment duties in box 19 of your self-assessment tax return.  If you were not resident in the UK but were resident in an EEA state, you can claim the deduction on form R43M(SED). 

You must claim the deduction within four years of the end of the tax year, for example the tax year 2023/24 by 5th April 2028. 

How TaxAssist Accountants can help 

If you need help or advice regarding Seafarers Earnings Deduction, TaxAssist Accountants can offer guidance and support in navigating the complexities of SED, ensuring you maximise your tax relief opportunities. Call TaxAssist Accountant on 01257 277 999 or use our online contact form. 

Date published 16 Apr 2024

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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