Seafarers' earnings deduction: EU and EEA residents
The seafarers' earnings deduction (SED) will be extended to European Union (EU) and European Economic Area (EEA) residents who pay UK tax on their earnings as a seafarer.
SED provides for 100% tax relief from earnings received for carrying out duties as a seafarer wholly or partly outside the UK during an eligible period.
One of the existing qualifying conditions is that a claimant must be ordinarily resident in the UK. This condition will be amended so that EU or EEA residents who are not ordinarily resident in the UK are also eligible for 100% SED for eligible periods.
Who will be affected?
EU and EEA residents who are not ordinarily resident or not resident in the UK, but spend part of their time on voyages in UK waters.
From 6 April 2011.
This measure had previously been announced at the Pre-Budget Report in December 2009 and aligns the UK provisions with the EU Treaty (equal treatment of workers within the EEA).
This is a welcome provision as it will avoid the current mismatch whereby a non-UK resident who is resident in the EU/EEA could be liable for UK tax while working on a vessel undertaking a voyage in UK territorial waters, whilst his colleague who is ordinarily resident in the UK could claim 100% relief from UK tax under the SED provisions.
Non EU/EEA residents working in UK territorial workers who are either non resident or resident but not ordinarily resident in the UK remain subject to UK tax and will still need to rely on double taxation agreements to mitigate any double charge to tax, where the SED is not available.