Work Offshore Aboard a Ship to Earn a Tax Free Salary

Today we aim to educate you on a piece of legislation that was first created in 1988 under the Finance Act that gives seafaring UK citizens the ability to claim a 100% tax exemption on all foreign income earned. This came into being after years of legal battle between seafaring unions and the HMRC. Finally, a full agreement was made as of 2012 that allows certain seafarers the ability to not pay taxes on earned income. Now there are certain rules and regulations that must be followed in order to benefit from this tax exemption. As of 2018 seafaring unions are still going through legal wrangling with the hope of allowing members of the armed forces to also fall under the rules of this tax exemption. Ultimately it seems to be the HMRC’s best-kept secret that many seafaring UK citizens either do not know about or harness. We aim to show you how it works and help you to understand whether or not if you qualify for this excellent tax exemption. Just read below and will help you navigate the HMRC and their rules to find out if you can use the Seafarers Earnings Deduction.

The first time this tax law was introduced it was created for specific valid reasons that benefit the UK. To begin with, the HMRC decided that seafaring employees deserved a tax break because of the highly competitive global marketplace of the seafaring industry, because of the time spent outside of the country as well as to play a role in the defence needs of the United Kingdom. The financial remuneration was created to help with compensation because of the pressures associated with the industry and the competition related to finding employment. Many citizens of the United Kingdom don’t take advantage of the Seafarers Earnings Deduction mainly because they do not know about it or fully understand it.

Cruise ship crew are all smiles as they earn tax free income under HMRC rules. Image credit: Burst Daily

When we take a look at the HMRC Helpsheet 205 it outlines who does and does not qualify for this tax exemption. The main requirement of this tax break is that you work on a ship. What is constituted as a ship is not explained but what is not defined as a ship is explained. We have listed the following that does not meet the criteria under the definition of a vessel. These include flotels, mobile offshore drilling units as well as fixed production and floating production platforms. If you work on one of these types of units then, unfortunately, you will not be able to take advantage of this tax exemption. Some people who don’t fully understand the rules or regulations may choose not to file their annual tax return which is a big mistake. Other people may choose to create limited companies ashore or in other countries to have more leverage with their taxes. Ultimately if you can qualify for the Seafarers Earnings Deduction it is a great idea to use it because after all, you will not have to pay anything on your foreign earned income. With a deal like that you would have to be crazy to pass it up.

Another rule of the Seafarers Earnings Deduction is that you are limited to spending a maximum of 183 days ashore in the UK per tax year. A day in the United Kingdom is counted if you were in the country at midnight of that given day. It is a good idea to keep all paperwork and stubs that show evidence that you spent a maximum of 183 days in the UK. If you are above the 183 days then you will not be able to harness the exemption. Also, you are required to embark and disembark from foreign ports. If you embark or disembark from the UK then you will not be eligible to use the Seafarers Earnings Deduction. You will also be governed by how many days you spent at sea and we recommend you look at the HMRC Helpsheet 205 for further detail.

Ultimately we believe more seafaring UK citizens would access the tax exemption if it wasn’t so elusive and hard to understand. It is absolutely integral to declare all of your income earned offshore. After all with the Open Exchange of Information, the government can look into your financial records and get full details of your income. If you were not to declare your income you really couldn’t do anything with it including acquiring loans or mortgages.

After 18 years the tax exemption seems to be here to stay and is a great exemption and should be used if it is applicable to you.


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