Seafarers' Earnings Deduction: what it puts on your payslip

The published figures

What it puts on, or takes off, the payslip

Your payslip, month by month

Nothing changes on it. There is no seafarers' line, no relief code and no reduced tax figure. Your employer operates PAYE on the tax code HMRC has issued and takes income tax off every payday at the ordinary rate, whether or not you are going to qualify. The deduction is settled after the tax year ends.

Tax code

Whatever HMRC has given you, commonly 1257L. The code does not know about the deduction and is not adjusted for it. If your code changes mid year, that is about something else.

Code NT, the one exception

NT means no tax is deducted at source. HMRC can issue it to a seafarer, but only after it has processed your first claim, and you must be UK resident, in PAYE employment, on a vessel accepted as a ship for this deduction, filing a return every year, and on a contract of at least 12 months or six months continuous employment with the same employer working outside the UK. Form R44 requests it. If the employment ends or changes so you no longer qualify you have to tell HMRC at once, and tax underpaid on a code you were not entitled to is repayable in one lump sum.

P60

Shows your total pay for the year and the total income tax deducted from it, with no sign of any deduction. On a year you fully qualify, the tax figure on the P60 is close to the amount you are claiming back.

SA102 Employment page

Your pay and the tax taken off go here in full, exactly as the P60 states them. The deduction is not netted off first. The SA101 box even says so: "enter pay on your Employment page".

SA101 Additional information, box 11, page Ai 2

The one box on the return that carries the deduction. You enter the amount of earnings that qualify, not the tax. Work the figure out on the HS205 working sheet first.

SA100 box 19, page TR 7

The names of every ship you performed duties on during the tax year. There is no ship-names field on the return: box 19 on page TR 7 is the SA100's general "Any other information" box, and the SA101 notes for box 11 direct the ship names into it. The notes state it as a requirement, "You must also include the names of all the ships that you worked on", so a return filed without them is incomplete.

Your tax calculation, and the repayment

This is where the money appears. The calculation applies box 11 against the employment income and works out the tax actually due, and HMRC repays the difference between that and what PAYE already took. You can print the calculation, called an SA302, from your HMRC account 72 hours after filing, along with a tax year overview.

What goes wrong

A return visit that ran to 184 days

Period B in section 378(3) is capped at 183 days and there is no margin in it. At 184 the chain breaks: HMRC's own working sheet tells you to rule off at that entry and start a new table below it, so everything you had built up before that visit is gone for the purposes of the period that follows. Shore leave, a long refit, sick leave or a spell between contracts all count the same way, because the test is where you were, not why.

Counting days by when you flew rather than by where you were at midnight

A day is a day of absence only if you are outside the UK at the end of it. A flight home that lands at 22:00 makes that a UK day, and a flight out at 23:30 makes that one an absence. HMRC allows one narrow exception on the water: casting off from a UK berth allied to passage to an overseas port is taken as departure, and the ship is taken as arriving when it berths. Between UK ports even that does not apply and the ship's position at midnight decides it.

Assuming an offshore installation is a ship

Section 385 says a ship does not include an offshore installation, and section 1001 of ITA 2007 defines one as a structure put to a relevant use while standing or stationed in any waters. That covers fixed and floating production platforms, floating storage units, FPSOs, mobile offshore drilling units including drillships, semi submersibles and jack ups, and flotels. It applies anywhere in the world, and it keeps applying while the structure is moving between locations, temporarily used for something else or laid up. Anchor handling, diving support, pipe laying, seismic survey, shuttle tanker and standby vessels can be ships, but only while they are not standing or stationed on a relevant use.

Expecting National Insurance to follow

It does not. The deduction is from earnings for income tax and nothing else. Mariners' National Insurance runs under regulation 115 of the Social Security (Contributions) Regulations 2001 and is decided by residence, who pays you, where the vessel is registered and whether you are on the UK continental shelf. Your employee contributions come off at the ordinary 8% and 2%. The only relief is on the employer's side, and only on a foreign going ship.

A voyage that never called at a foreign port

Section 382(2) treats duties on a vessel on a voyage not extending to a port outside the UK as performed in the UK, and section 382(3) puts the designated areas of the continental shelf inside the UK as well. HMRC's worked example is a trawler that sails from a UK port to fishing grounds near Iceland and home again: one voyage, begins and ends in the UK, no deduction. Dock at an Icelandic port to land the catch and both legs become foreign.

No day by day record

You have to be able to evidence every day. HMRC asks for the completed HS205 working sheet, air tickets or other travel vouchers, hotel bills or other receipts, passports and visas, the seafarer's discharge book, and freeboard logs for the ships you worked on, and it can go to your employer to confirm the voyage and the crew. A claim built from memory a year later falls apart at the first question.

Claiming while resident outside the UK and outside the EEA

You must be resident in the UK or resident for tax purposes in an EEA state other than the UK, and HMRC's manual says the residence condition applies across the whole eligible period. An EEA resident claims on form R43M(SED) rather than through a UK return, and only against earnings for seafaring duties performed in UK waters, because that is all the UK taxes. If you are resident in neither, the deduction is not available at all, though form R43M may get UK tax back another way.

What to check on your next payslip

• Every limb of the test is counted in whole days and settled by where you were at midnight, so the record it rests on is a dated one, day by day, running from the first qualifying voyage. The 365 day period, the 183 day cap and the half rule are all counted in days, and none of them can be reconstructed later. HMRC's working sheet is built from the dates you left and the dates you returned, so those two columns are the minimum the log has to produce.
• Section 378(3) caps a single return visit at 183 days, counted from the last day of absence before it. This is the one figure you can still control. Over 183 and the run before it stops counting towards the period that follows, and the whole period may fall short of 365. Checking it costs nothing before the fact and cannot be fixed after it.
• Section 382(2) settles the place of performance by whether the voyage extended to a port outside the UK, which is a separate fact about every voyage and needs its own evidence. The place of performance test turns on that call. Without it the voyage is treated as performed in the UK however long you were at sea, and the UK sector of the continental shelf counts as the UK for this.
• Section 385 and section 1001 of ITA 2007 decide whether a vessel is a ship or an offshore installation by what it was being used for at the time, not by what it is called. Whether something is a ship or an offshore installation depends on relevant use and whether it was standing or stationed, decided on the facts of each case. The same support vessel can be a ship on one contract and an offshore installation on the next, and time on the installation does not count.
• HS205 carries HMRC's own ten step working sheet for the eligible period, and box 11 is where the figure it produces goes. The sheet is the ten step method HMRC uses to decide the same question, including when to rule off a table and restart it. A figure entered without it is a guess at an all or nothing test.
• The documents HMRC names for a claim are the passport, the discharge book, the travel tickets and the hotel bills for the whole period, with every ship listed in box 19 on page TR 7. These are the documents HMRC names when it wants confirmation of dates of absence. The ship names are not optional colour: the SA101 notes for box 11 require them, and box 19 on page TR 7 is the only place on the return they fit.
• The tax figure on your P60 and the repayment on your tax calculation are the two ends of the same sum, and the months you were away are what should reconcile them. PAYE took tax on every payday of the year regardless of the claim, so on a fully qualifying year the repayment should be most of the tax on that employment. A much smaller figure usually means the eligible period was cut short somewhere in the working sheet.

The 3 occupations this reaches, and how

Each line is specific to that trade. Where a scheme depends on how you are engaged rather than on the work itself, the line says so.

Dock Worker / Stevedore

Almost certainly not, and the reason is where the job happens. Stevedoring is quayside work: the lashing, the crane, the straddle carrier and the reach stacker are all on the land side of the ship's rail, and section 384 needs an employment that consists of duties on a ship. Going aboard a berthed vessel to secure a load does not convert it, because that vessel is alongside in a UK port and you are in the UK at midnight, so no day of absence is earned. The picture only changes if the same person signs on as crew and sails, which is a different engagement under a different contract.

Ferry Crew Member

The timetable decides this, not the rank. Crossings that call at a port outside the UK, such as the short sea routes to France and the Low Countries or a run into Dublin, count as duties performed abroad. A sailing that never extends beyond a UK port does not: the Clyde and Hebridean network, the Northern Isles, the Solent and the Thames are all domestic water for this, and section 382(2) treats those duties as performed in the UK however far you steamed. Passing the route test is only half of it, because an equal time rota that puts you home in your own bed at midnight every other fortnight will not build 365 days of absence either way.

Royal Navy Midshipman

Excluded by statute, and by the definition rather than by any of the counting rules. Section 384 says employment as a seafarer means employment other than Crown employment, so an officer under training paid out of public revenue is outside the deduction before anyone opens a working sheet. HMRC states it directly: members of the armed forces who perform duties on ships are not entitled. Initial Sea Time spent well outside UK waters changes nothing. The Royal Fleet Auxiliary is the one seagoing Crown employer carved out, on 15 March 2018, so the same person who later joins the RFA or a merchant operator can claim on that employment.

Questions

Sources