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HMRC have published Brief 33/07 entitled Seafarers' Earnings Deduction - New information requirement for tax returns for the year ended 5 April 2007.

For tax returns for the year ended 5 April 2007 onwards, employees who enter an amount for Seafarers' Earnings Deduction (SED) in box 1.37 of the Employment Pages are required to enter the names of the ships on which they performed employment duties as additional information in box 1.40.

There are references to this new requirement beside box 1.37, on page 8 of the Notes on Employment and on page 2 of Help Sheet IR205.

This change has been introduced so that HMRC will no longer need to open a formal enquiry simply to establish the name of an employee's ship in order to check whether earnings for duties performed on that vessel qualify for SED. This will allow HMRC to focus enquiries on those cases where the status of a particular vessel may be in doubt and / or to check that the employee has satisfied the other conditions for SED and correctly calculated the amount of the deduction.

ITEPA 2003, Pt. 5, Ch. 6 gives a deduction from seafarers' earnings for a year in which the seafarer is resident and ordinarily resident in the UK. To obtain the deduction, three conditions must be met (ITEPA 2003, s. 378(1)):

• the earnings must be taxable earnings under ITEPA 2003, s. 15 or 21 (earnings for year when employee resident and ordinarily resident in the UK);
• the duties of the employment must be performed wholly or partly outside the UK. (If the employee is non-UK domiciled, and the earnings are ‘chargeable overseas earnings’ within ITEPA 2003, s. 23, the earnings will be charged on the remittance basis under ITEPA 2003, s. 22 and the FED will not be available.);
• some or all of the duties must be performed in the course of an ‘eligible period.’

Fewer routine enquiries from HMRC for employees who observe the new requirement should help to reduce the costs of tax compliance for this category of employee.

Link

HMRC Brief 33/07