Category: Law

HMRC’s Seafarers Earnings Deduction: Your Fast Track to Tax Free Income

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.

Acknowledgements

This article was created using resources including text, imagery and reference material from the following websites:

Conveyancing Solicitors Kent: Help Moving Home

The process of purchasing any real estate property differs from one country to another. In the UK, the process begins with the buyer identifying a property for sale that fits his or her budget and meets requirements as well. Thereafter, the procedure becomes more complex because laws of contract and stipulations by governing bodies come into play. It is not every day that people buy property. Therefore, it is unlikely that they would know everything about conveyancing. The best thing to do under such circumstances is to avail of the services of experienced solicitors.

Note that solicitors should hold the required licenses and also be allowed to practice in a specific region. Therefore, services of licensed solicitors in Kent would be needed if the property to be purchased is located in Kent or any region near it.

A “terms of engagement” contract is entered into between the solicitors and the buyer. This contract is simple. The solicitors are given the responsibility of ensuring that the conveyancing is done according to legal requirements and that their client’s interests are safeguarded.

Thereafter, most of the conveyancing procedure is completed by the solicitors. The procedure begins with obtaining a draft contract copy. There are many aspects of a contract that people do not understand. For example people may not understand the difference between leasehold property and freehold property. It becomes the duty of the solicitor to study the documents from which their clients would eventually derive the title, including details such as those of fixtures and fittings.

The additional duties of solicitors forming part of a conveyancing procedure are:

  1. Confirming from land registry records the seller’s ownership. For this the solicitors verify “title plan” and “title register”. Without obtaining copies of this, the transfer of property cannot be completed.
  2. Confirming from local authorities whether the property can be sold or not. If local government has plans to acquire it for building something for public benefit, then the property in question cannot be sold. There may be other reasons too for the local government banning the sale of such property.
  3. Environment search is needed to confirm whether or not the property is contaminated beyond acceptable limits. In addition, this search provides information on floods risks, and relevant maps.
  4. Cancel repair dues. The solicitor needs to confirm whether there are any such dues payable.
  5. Water and sewerage connection searches from water authorities. These are important because the buyer should be aware of these if he or she has plans of modifying the property.
  6. Searches specific to location, and other optional searches.

The solicitors also help with mortgages by studying the terms and conditions and letting the client know the implications. In addition, conveyancing solicitors help in obtaining a valuation of the property for the purpose of getting the mortgage loan. These solicitors are also in touch with surveyors who help in surveying the property as per the document copy of the sellers, and let the buyer negotiate accordingly.

The next part of conveyancing is signing of the exchange contracts. These are reciprocal conditions between buyers and sellers. For example a sale consideration needs to be paid and a schedule for payment agreed to. Solicitors do the negotiation of all such terms and conditions as deemed necessary and prepare an exchange contract in which some of the terms are to be complied with by the buyer, and other terms and conditions are to be complied with by the seller. There is a time limit defined in these exchange contracts. Solicitors help the buyer negotiate the initial deposit, which if the contract is not concluded on a specified date, will have to be forfeited.

After all the terms and conditions are complied with as mentioned in the exchange contracts, the final part of the deal, i.e., the sale deed is executed. Effectively, the conveyancing procedure is then concluded.

Conveyancing Solicitors Kent