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Tax affairs can be complex for seafarers – and if you get things wrong, the consequences can be financially devastating. Rob Coston reports
Few of us enjoy spending our time completing tax returns, but seafarers often need to take special care with their finances. You may be working as a freelancer rather than an employee, which comes with financial advantages but also pitfalls.
It's important not to ignore your responsibilities. Those who don't follow the rules properly can face financial disaster, as the accountants who specialise in working with seafarers confirm.
Mariya Deschamps of MD Accounting Services says that her company is now encountering 'quite a number of seafarers who have never filled out a tax return, especially young people.
'This can carry on for years, but the moment they decide to buy property and apply for a mortgage, they need to provide their tax history. It's important for seafarers to keep their paperwork in order, try to keep sufficient records and act on advice! Tax is a complicated matter, not straightforward, so keep on asking questions and do your research.'
In the UK, seafarers' taxes are complicated by the Seafarers Earnings Deduction, a valuable but complex form of tax relief for seafarers.
Ben Byrne, managing director of Seatax Ltd references one master who was hit with an unexpected tax bill for tens of thousands of pounds due to an SED mistake. For many years he had failed to pay enough tax because he incorrectly believed that he was not liable. In fact, because he was working on coastal vessels – and since the North Sea UK continental shelf is not considered to be outside the UK – he was not covered by SED. In the end he had to come out of retirement and go back to work.
What is SED?
SED came into effect in 2012, after a fifteen-year fight by trade unions including Nautilus International (then known in the UK as NUMAST). If you qualify for SED, you can claim back 100% of the income tax that you have paid on overseas earnings. It is available for UK taxpayers who meet specific conditions. As many people are aware, you must remain outside the UK for a set period, but there are other conditions too. More information can be found here.
Nautilus is committed to defending this programme, which helps to make this tough profession financially worthwhile to UK citizens. The Union has repeatedly lobbied on behalf of members around SED: for example, in 2021 when members told Nautilus they were worried whether SED would affect their property-buying status due to a new Stamp Duty Land Tax (SDLT) surcharge.
The Union also spoke up for members during the pandemic, when many seafarers were trapped in the UK and therefore faced unexpected tax bills.
Getting help with SED
There are plenty of ways to make an SED mistake. You might find yourself on the wrong kind of vessel, as for tax purposes, not all ships are the same. And just because a fellow seafarer thinks they're eligible, that doesn't mean you are.
Nautilus therefore recommends using a specialist seafarers' tax advice company to ensure that your SED calculations are correct.
'Some people say, I'll get back to you about tax support next year,' Mr Byrne says. 'I say, don't do that, because if you come back next year, you might have blown it by then.'
'The idea among seafarers is that if you stay outside of a UK port for 183 days then you don't have to pay and don't have to do anything, but actually this is still your place of residence,' Ms Deschamps says.
Mr Byrne stresses this point as well: 'The one thing I really want seafarers to understand is that it's not just a matter of staying out of the country for 183 days. So many people call us and say "everything's OK, I've done my 183 days now", but actually the time period's not that important – it's how your days fall that matters.'
These companies sometimes have experience working with the UK tax authority HMRC on SED and are therefore well placed to deal with government officials. But Mr Bryne worries that in future, many seafarers could fall foul of tax authorities because of self-assessment. 'Because HMRC stopped investigations after getting rid of the marine section, there's probably thousands of seafarers doing it incorrectly,' he says. 'Why take that risk yourself?'
Tax advice in the Netherlands
A different history of union activity in the Netherlands means that – unlike the UK branch – Nautilus NL can sometimes offer direct tax assistance to members.
Members who would like assistance can get in touch with Ben Noordzij by emailing firstname.lastname@example.org or by post at the Rotterdam office. He helps members with tax advice, assisting them to fill in their Dutch tax returns, communicating with or filing complaints to the Dutch Tax Office, and requesting benefits ('toeslagen').
Note that Mr Noordzij can only assist with Dutch tax forms, so members who live in or work for a firm based in another country will need to access support in that country instead. Read more here.(Dutch language only).
- In Switzerland, members who are taxable in Basel can get help completing their tax returns from the Basel trade union federation service. Discounts are available for Nautilus members.
- Some UK firms offer discounted tax services for Nautilus members (login)