Discover the basics of Seafarers Earnings Deduction (SED), a tax relief for maritime workers, including eligibility criteria and record-keeping requirements.

What is Seafarers Earnings Deduction (SED)?

Seafarers Earnings Deduction (SED) is a tax relief specifically designed for employees working on a moving vessel in the maritime industry. This includes roles within the security sector, cruise liners, yachts, and even The Royal Fleet Auxiliary.

Key Eligibility Rules for SED

To qualify for SED, employees must adhere to the following rules:

• Foreign Port Visit Requirement
  Employees must have at least one foreign port visit per tax year, per employer.
• Qualifying Period (QP)
  During the first 12 months of employment employees must complete a qualifying period spending at least 183 days out of the UK. The Qualifying Period (QP) begins on the date an employee departs the UK for their first transit and does not need to coincide with the start of the tax year.
• It is crucial to maintain a running total of days spent in and out of the UK. If the number of days spent in the UK exceeds those spent outside, the QP fails. Consequently, all earnings up to the failed date could be taxable, necessitating the start of a new QP on the next transit.
• Employment Status
  To qualify for SED, employees must be employed, even under freelance contracts, however freelance contracts from work providers do not disqualify eligibility.

SED Days Beyond Your First Year

When you move into your second or third year of working in the Maritime Security Industry:

• Your first year is your Qualifying Period (QP). After completing the QP, you are classed as qualified for SED and remain so until you fail to meet the required days or leave the maritime industry.
• There’s no need to complete another year after the first one. For example, if you complete your 12-month QP and then decide to leave the Maritime industry after three months, you would still qualify for SED, as long as you didn’t fail your days during the interim.
• The days completed outside the UK during your first year continue to roll over after the QP. You don’t need to start a new log sheet after completing your first year.
• It’s important to distinguish between the tax year (6th April to 5th April) and your QP, which is the 12 months from your first maritime transit out of the UK.

Need Help?

At Whittaker & Co., we specialise in assisting maritime workers with SED claims, providing expert guidance on eligibility and record-keeping.

Our next article will explain how to claim SED, providing crucial information to make the process as straightforward as possible.

Seafarers Earnings Deduction: tax relief if you work on a ship – GOV.UK

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