The rules say….
If you’re an employee and work at sea, you may be able to reduce your tax bill by getting the Seafarers’ Earnings Deduction.
To get the deduction you must have:
- worked on a ship
- worked outside of the UK long enough to qualify for the deduction – usually a minimum of 365 days
- been resident in the UK or resident for tax purposes in a European Economic Area (EEA) State (other than the UK)
You can’t get the deduction if you were:
- a Crown employee (eg, a Royal Navy sailor)
- not a UK resident
- not a resident of an EEA State (other than the UK)
If you had more than one job you’ll still get the deduction against your seafarer pay if you meet all the conditions.
https://www.gov.uk/guidance/seafarers-earnings-deduction-tax-relief-if-you-work-on-a-ship
So if you are self employed – Sole Trader or Partnership – you can’t be an employee.
If you work on cruise ship or a shipping line you will probably be an employee so that’s fine but if you would on other ships then you should create your own Limited Company so that you can be an employee.
HMRC are actively investigating many self assessment returns where the claim for Seafarers Deductions has been incorrectly made.
The mechanics of the deduction – the first stage is to calculate what the legislation (ITEPA 2003, s 378(2) and (3)) calls an eligible period, which:
- is a period of at least 365 days;
- begins and ends with a period of absence from the UK;
- does not include any single period of presence in the UK in excess of 183 days; and
- at least half of which is spent outside the UK (the 50% test to which All at Sea refers).
Then its based on employment earnings.
Here is a tax calculator to help http://seafarerstaxcalculator.com/
A Ship is large sea vessel carrying passengers or cargo, so its unlikely a yacht would be considered a ship. Although if its large enough it might.
