Your Questions Answered: How does the 'eligible period' for Seafarers Earnings Deduction work?
Working on a cruise ship is a perfect example of how amazing and diverse the opportunities for work in our industry are. A chance to travel the world whilst doing what you love? Pretty appealing I’d say!
So where does it leave us performers when it comes to paying tax? There’s A LOT of incorrect information out there about paying tax and working on cruise ships – particularly around that tax deduction we’ve all heard of called 'Seafarers Earnings Deduction' (an exemption from paying tax on your cruise ship income).
The criteria for being able to get it can be really confusing (hence the confusion), because it comes down to whether or not you have built up what’s called an 'eligible period'.
I was wondering if you could clear up what it means by ‘eligible period’? I know that it needs to be 365 days minimum but say, if I have done two 8 month contracts, that adds up to more than 365 days, but obviously not within the one tax year. Do your days on the ship accumulate from the day you started, say 2 years ago? Would I then have made the 365 days to get Seafarers Earnings Deduction or does it have to be within a certain time frame? Thanks for your help!
Start your eligibility counter!
Luckily for all you cruisers, James has made a Seafarers Earnings Deduction Calculator (the first to exist, we believe) that allows you to put in your cruise dates and it will tell you whether or not you're eligible for the deduction.
However, its always a good idea to have a clear understanding of how it works and you should confirm this independently. First thing to understand is that 'eligible periods' don’t actually relate to tax years, they relate to the individual cruises themselves (and the time between them).
It is a little complicated, but essentially, when you go on your first cruise, imagine an eligible days counter starts and you keep adding days to this eligible period so long as:
- Each time you get back from a cruise, your total days cruising within the period are more than your total UK days in the period; and
- Each time you go on a cruise, you have been back in the UK for fewer than 183 days.
If you breach either of these then your eligible days counter goes back to zero (and starts again the next time you go on a cruise).
If you ever reach the point that you get back to the UK after a cruise and the total period has now reached more than 365 days, then every trip within the period becomes eligible for Seafarers Earnings Deduction.
This means you can go back into your previous tax returns and adjust them historically applying the deduction if you qualify. This could result in tax relating to previous cruise ship income being repaid to you as a rebate.
Remember that we’ve got a post on Cruise Income and if you’re using the SansDrama Web App you can input your cruise income as you go, selecting the currency you’ve been paid in, and it does the conversion for you as well as adding that to your tax return report.
If you’ve got a question we haven’t covered on the site already, just ask and we’ll get back to you. Thanks again Josh!