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HMRC internal manual

Employment Income Manual

Seafarers’ Earnings Deduction: attribution of earnings: effect of other deductions

Section 381 ITEPA 2003The deduction is available only against the net earnings attributable to the eligible period.

The net earnings are amounts remaining after deductions for:

  • pension contributions
  • allowable expenses and
  • capital allowances.The rule mainly affects cases where the eligible period covers only part of the tax year.

ExampleA seafarer has an eligible period ending on 5 November 2008. For 2008/09 he has earnings of £24,000 and pays pension contributions of £2,400. His net earnings are £21,600.

The earnings attributable to the eligible period from 6 April 2008 to 5 November 2008 are £12,600 (7\12ths of £21,600).

Liability for 2008/09 is calculated as follows:

Earnings   £24,000
Pension £2,400  
Seafarers’ deduction £12,600  
  £15,000 £15,000
Net taxable earnings   £9,000

Without this rule a person could effectively get relief for a full year’s expenses, etc. against a part year’s earnings. So in the example above there would have been a seafarers’ deduction of £14,000 (7/12ths of £24,000) plus pension contributions of £2,400 leaving only £7,600 taxable.