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HMRC internal manual

Employment Income Manual

Seafarers’ Earnings Deduction: the year the deduction is given

Sections 378 and 379 ITEPA 2003Where a seafarer is entitled to the deduction, it is given in the year the earnings are received.

The deduction is given in calculating the net taxable earnings for earnings that are taxable under Section 15 (or Section 21 before 6 April 2008) ITEPA 2003. You need first to identify the year that the earnings are for; put another way, the year in which they were earned. If in the earnings year the earnings attracted the deduction then the deduction tracks through to the year the earnings are received if it is different.

In the case of seafarers who earn and receive their earnings in the same tax year the position is straightforward. However, some earnings may be paid after the year in which they were earned and they may be mixed up with other earnings of that later year that do not qualify for the deduction.

ExampleAn ordinarily resident seafarer works abroad. He builds up an eligible period that runs from 6 April 2008 to 30 September 2009. He is paid a salary of £2,000 a month throughout and he also gets a bonus of £10,000 for the year ended 5 April 2009. The salary is paid when it is due at the end of each month and the bonus is paid in October 2009. The result is set out below:

2008/09The self assessment of employment income for 2008/09 will show net taxable earnings from employment as a seafarer of nil - £24,000 less seafarers’ deduction of £24,000. This is the salary he receives in the year. It was all earned in the eligible period.

2009/10The self assessment of employment income for 2009/10 will be on £34,000 less seafarers’ deduction of £22,000. The deduction is due on the salary of £12,000 for the eligible period April to September 2009 plus the £10,000 bonus that was earned for the previous year (which was also an eligible period).