Working on a ship
There is a special deduction for people who normally live in the UK, but work onboard a ship. It can also apply to non-UK resident employees who are resident for tax purposes in a European Economic Area (EEA) State.
Your work does not have to related to seafaring. For example you could be a musician, entertainer or cook – anyone who is employed onboard is eligible, if they meet the conditions.
The deduction is called the Seafarers’ Earnings Deduction. The Seafarers’ Earnings Deduction permits 100% of on-board earnings to be free of UK income tax.
There are a number of conditions. The most important is that the earnings must relate to a qualifying of at least 365 days. This doesn’t mean that you need to be on-board ship for a year without coming ashore in the UK. It means that you have to look at a period of 365 days and be very careful about returns to the UK. The qualifying period does not need to cover a tax year. The deduction does not apply to Crown Servants such as members of the Royal Navy.
Care is needed here to interpret the meaning of ‘ship’ for tax purposes. Oilrigs and other offshore installations aren’t ships for the purposes of the Seafarers’ Earnings Deduction. Cargo vessels, tankers, cruise liners and passenger vessels are.
To be eligible for the Seafarers’ Earnings Deduction you must be resident in the UK for tax purposes.
For more details see http://www.hmrc.gov.uk/incometax/relief-ship.htm.
Non-EEA resident seafarers
If you are not UK or EEA resident, but have paid UK income tax on seafaring earnings, you may be able to claim a refund – see https://www.gov.uk/government/publications/income-tax-non-resident-merchant-seafarer-repayment-claim-r43m