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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
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Seafarers’ Earnings Deduction: attribution of earnings: terminal leave pay

Section 379(2) ITEPA 2003

Pay for a period of leave taken at the end of an eligible periodThe following guidance applies when:

  • a seafarer takes leave in the United Kingdom
  • at the end of an overseas voyage or assignment and
  • earnings from the voyage or assignment are subject to the deduction and
  • the seafarer is receiving leave pay for the duration of the leave period.For the purposes of the deduction, the earnings for the leave period are attributed to the eligible period that ended when the employee returned to the United Kingdom. There is a restriction on this treatment. The earnings can only be attributed to the eligible period if they are earnings for the tax year in which the eligible period ends.

ExamplesA seafarer returned to the United Kingdom on 31 January 2009. She had been working in the Gulf for 13 months during which time she had established an eligible period of more than 365 days. She was entitled to terminal leave of 6 weeks. She remained in the United Kingdom until 14 March. Leave pay for the period 1 February to 14 March is attributed to the eligible period ended on 31 January and covered by the deduction.

A seafarer returned to the United Kingdom on 28 February 2009. He had been working in the Gulf for 13 months during which time he had established an eligible period of more than 365 days. He was entitled to terminal leave of 6 weeks. He remained in the United Kingdom until 14 April. Leave pay for the period 1 March to 5 April is attributed to the eligible period ended on 28 February and covered by the deduction. However, the terminal leave pay for the period 6 to 14 April is not attributed to the eligible period as the eligible period ended in 2008/09 and leave pay from 6 April 2009 will be earnings for 2009/10.

Leave pay for a period spent in the United Kingdom while ordinarily resident after returning from overseas during which time the seafarer had been non-residentNon-residents who return to the United Kingdom and become ordinarily resident may have their terminal leave pay treated differently.

Leave pay for seafarers returning to the United Kingdom following a period of non-residence, is likely to be taxable if it is receivable after the date of return, see EIM33061.