Obtaining & Maintaining Non Residency and SED (Seafarers Earning Deductions)
New to the industry, got a contract working overseas and don’t know where to start?
You may have decided that a land-based career overseas is the one for you.
There are many companies who are hiring sub-contractors to work for them overseas. These companies will generally offer work on a rotational basis that will fit in with HMRC guidelines so that you can keep your earnings tax free in the United Kingdom.
- Yes, tax free. All you have to do is follow a few rules that have been set out by HMRC (The TAXMAN) to qualify under the Full Time Work Abroad (FTWA) rules
Full Time Work Abroad (FTWA) Rules
To be classed as a non-resident you MUST adhere to the following:
- You MUST be employed or carry on a trade or profession abroad.
- You MUST work at least 35 hours per week.
- You MUST have a contract for your work for a minimum of 12 months.
- You MUST carry out the employment, trade or profession for at least one full April to April tax year.
- You MUST be present in the UK for FEWER than 90 days in a full April to April tax year.
HMRC Statutory Residence Test
- If you spend more than 90 days in the UK during a full tax year you WILL pay tax on all of your overseas income.
- No more than 20 days per tax year can be spent working in the UK or on courses for your Employer.
- Full time workers abroad will be entitled to claim a maximum of 60 days each tax year for “exceptional circumstances”.
- Mariners CANNOT be classed as non-resident.
- HMRC changed the rules of non-residency in April 2013 to ‘simplify’ being able to qualify.
- There are 3 different sets of rules depending on your circumstances.
- For the 3 different sets of rules there is a different total for the days allowance in the UK.
- IF YOU QUALIFY UNDER FTWA YOUR ALLOWANCE WILL BE 90 DAYS (in a full tax year) NO MATTER WHAT YOU HEAR ON THE RUMOUR MILL
Counting Your Days
- The day your plane lands in the UK is counted as a day IN the UK
- The day your plane flies out of the UK is counted as a day OUT of the UK
- Holidays abroad count as time outside of the UK
- Retain proof of travel, email confirmation, boarding passes, for 7 years.
- IMPORTANT – KEEP YOUR ACCOUNTANT UP TO DATE WITH YOUR TRAVEL MOVEMENTS.
- You are the experts in your role……
- We are the experts in the rules of Full Time Work Abroad. Do not believe all of the rumours you hear about tax and your days, contact us for guidance and reliable information.
Her Majesty’s Revenue & Customs (The TAXMAN) have created a tax relief for Mariners called Seafarers’ Earnings Deductions (SED). However HMRC have put qualification criteria in place that you must adhere to, to get your Seafaring Income tax free.
- You must be classed as Employed.
- You must spend at least 183 days out of the UK over a 12 month qualifying period.
- You must visit at least 1 foreign port, every tax year, for every employer.
1 – Employment
- Most Marsec companies provide Self-Employment contracts.
- Even though it is a Self-employed contract, HMRC would see you as being employed as you do not have to risk your own money, and the Security Co. pay for all your travel and accommodation.
- If you work for a UK based company and put them as your employer on your tax return you potentially risk that employer being hit with an NI bill. We doubt you will be working for them again if you put them at risk of HMRC knocking on their door!
- There are Foreign Recruitment companies available to provide you with a contract of employment; these companies will then pay your invoice.
2 – SED Days
- Your first Maritime trip out of the UK is the start of your Qualifying Period (QP).
- After this, anytime spent out of the UK can be logged towards your SED days i.e. holidays, stag weekends etc.
- If you spend too much time in the UK in between transits you can potentially fail your days. This will mean you need to restart your QP and you will be liable for tax on your failed transits.
- Retain all proof of being out of the UK i.e. ETickets, flight stubs, ferry tickets, old passports.
- KEEP YOUR ACCOUNTANT UP TO DATE ON YOUR MOVEMENTS
3 – Foreign Port Visit
- You must visit at least ONE foreign port, per tax year, per employer.
- Retain proof of your port visits. This should be in your Seaman’s Discharge Book. If not ask for a signed letter from your Security Company.
- Retain all documentary proof, if you are investigated and cannot produce proof, you will have to pay tax and will also be penalised heavily by HMRC!
- Keep your Accountant as up to date as possible with your circumstances.
- SED is a tax relief only available on SEAFARING DUTIES; income from being on standby in a villa or from travelling is not a seafaring duty and therefore will be taxable!
- You cannot claim SED if the vessel you are working on is involved in the exploration or exploitation of mineral resources i.e. gas and oil.
- You are the experts in your role…
- We are the experts in Tax for Mariners, do not believe all the rumours you hear about tax and your days, contact us for guidance and reliable information
I hope this information has been helpful, if you require any more advice or information, please contact –
T : +44 (0)1686 610662