On a daily/weekly basis we receive numerous enquiries about taxation and Seafarers Earnings Deductions (SED), however as we are not accountants we are unable to answer these queries accurately.
Therefore we have liaised with a specialist accountancy who work with clients in the maritime industry to provide you with some information and to answer our most frequently asked questions. Whittaker & Co are well known within the security industry for providing specialist tax advice and accounts for individuals working abroad and offshore.
We provided their Maritime Account Manager, Lee Stephens, with a list of the FAQ’s and he has answered these below;
Does G.M.R.S deal with my taxes?
Basically No! Your tax is your responsibility, as a U.K resident it is your responsibility to declare your income to HMRC via an annual self-assessment tax return. G.M.R.S has no accountability with HMRC as they operate out of Dubai.
Does G.M.R.S declare my pay to HMRC?
As G.M.R.S operates out of Dubai they are not required to declare anything to HMRC. They do not operate a PAYE system like your pay was in the U.K prior to starting in maritime i.e. Armed Forces/Police Force.
How many days do I need to spend out of the UK to qualify for SED?
To qualify for SED you must spend 183 days out of the UK over a 12 month period starting with your first transit. Please note this is days out of the UK not at Sea, therefore holidays abroad can also be included towards your claim for SED.
The day you leave the UK is classed as a full day out of the UK, the day you return to the UK is classed as a full day IN the UK regardless of what time you leave or return to the U.K.
There are no exceptional circumstances when claiming SED, therefore if you have to return to the UK due to family bereavement, illness or circumstances beyond your control then unfortunately they are days IN the UK and will be
recorded as such.
You need to retain all proof of travel e.g. ticket stubs, e-tickets, warning notices, this is because if your SED claim is ever investigated then you will have to prove you left the UK when you say you did. If you do not have this proof then HMRC could fail your claim and make you pay tax and fines.
Can I work in the UK between transits?
Yes, many of our clients work in the UK between transits. Any income earned in the UK is liable to UK tax, regardless of the fact you may be classed as qualified for SED. SED tax free income only relates to your seafaring income.
Why do I need an Accountant?
You don’t need an Accountant; however if you wish to claim SED you have to complete an annual self-assessment tax return to HMRC, on this you will have to declare all of your income (SED, PAYE, rental income, pension etc.). If you fail to
complete the tax return correctly HMRC can issue fines as a result. The use of an Accountant to carry out your accounts and tax returns is completely your own decision. A good Accountant will keep you on track to qualify and remain qualified
for SED. Also an Accountant will be up to date with any changes to the rules or regulations from HMRC.
Do I need to declare anything to HMRC?
If you are claiming SED then you HAVE to complete an annual tax return. Even if you have no tax to pay and you have easily qualified for SED you still have to complete a self-assessment each year. If HMRC are expecting a tax return from you and you fail to submit one they can fine you up to £1,600.00.
Failing to inform HMRC of your situation or your income could have future repercussions, if they believe you should have completed tax returns they will issue you penalties because of this. HMRC have the power to investigate over 7 years so
this could amount to a lot of penalties being backdated.
Should I set myself up as a Limited Company?
As a Limited Company you can claim SED if you qualify for it. However being a Limited Company can be a more expensive option. Firstly Accountancy fees are more expensive for a Limited Company than as an individual. Secondly as a Limited Company you will end up paying HMRC in either Corporation tax or in Employers/Employees National Insurance.
Can GMRS assist in obtaining a mortgage?
GMRS are able to provide you with a letter detailing your income; however if you do not declare anything to HMRC obtaining a mortgage will be very difficult. Since 6th April 2015 the rules and regulations for Mortgage Lenders have
tightened and therefore more proof is required to obtain a mortgage. Lenders will now ask for a copy of your SA302, this is your tax calculation from a tax return, if you have not completed a tax return you will not be able to obtain a SA302.
If you are looking at trying to get a mortgage in the near future please contact GMRS and your Accountant ASAP to help gather the information required. It is a common problem that clients contact us after they have met with the Mortgage
lender, it would be a smoother process if we were contacted before this.