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Seafarer’s Earnings Deduction – European Commission threatens to take UK to European Court of Justice
Wednesday, June 30th, 2010
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The Seafarers’ Earnings Deduction (section 40 of the Income Tax (Earnings and Pensions) Act 2003) can provide 100% UK tax relief on earnings from carrying out duties as a seafarer wholly or partly outside the UK. One of the qualifying conditions for the deduction is that the claimant must be ordinarily resident in the UK.
In December 2009, the Pre-Budget Report announced that, to ensure that these provisions are compatible with the EU treaty, this qualifying condition would be extended so that seafarers who are EU or EEA residents can claim the deduction on their earnings as a seafarer that are liable to UK income tax. However, the statutory change was not included in the Finance Act 2010 as a result of the General Election.
On 22 June, the Coalition government’s 2010 Budget announced that the adjustments will now be made by means of the coming Finance (No. 2) Act 2010. Two days later, and apparently in ignorance of the government’s intentions, the European Commission issued a press release that formally asked the UK to make this very change within two months or risk referral to the European Court of Justice.
In explanation, the Commission considers the existing condition to be discriminatory and that seafarers who are subject to the UK income tax but not resident in the UK should be treated the same as UK residents, under the EU right to the free movement of workers within the EU.
Is there a communication problem here, or is the Labour government and now the Coalition government resisting this requirement behind the scenes?
Further information:
Direct taxation: Commission formally requests the United Kingdom to amend income tax rules for seafarers
Ruslans Sokolovs says:
February 15th, 2011
16:14
I am seafarer in end off 2007 I start my employment in UK based shipping company working in UK offshore sector.My Polish colleges who were employed all ready for many years refund them tax.I wrote a letter to Revenue asking them am I able to refund my tax, in the letter I sent all necessary information about me.And I got answer from Glasgow Revenue that I am absolutely able to do so,beside they send me a letter with advice and example how I have to fill up the form and also they advice me for NT code which later was issued.However after three years They start the investigation now Revenue decide that I owe them tax for three years ,could you imagine how I and my family feel now.I found a lower in UK and we appeal against that based on EU low. But our appeal was unsuccessful Revenue Inspector ignore both facts that I was wrong advised by Revenue and discrimination under EU low.I rarely do not now what to do because the amount off money is very big.I do not now is there any possibility to help me with that case.Also I new that it is a very normal practice for Revenue because many of my Latvian and Polish colleagues face same problems.So non professionalism off Revenue Inspectors who give a wrong advices and issue a penalties show that in UK ,EU low just not working at all,plus when you deal with Revenue they could do with you whatever they want,ignoring all aspects is it justice or EU low.
Ruslans Sokolovs.
Tim Kelsey says:
February 16th, 2011
21:01
It’s difficult to comment on an individual case without seeing all the facts but what I think Ruslans should focus on is whether or not the tax bill has been generated as a result of HMRC not allowing the seafarers earnings deduction or whether it has been generated for another reason. If it is the former then he should stick to his guns and pursue the matter through the formal complaint channels at HMRC as clearly EU law is on his side. How about writing to his (UK) Euro MP and asking them to intercede on his behalf?
Ruslans Sokolovs says:
February 22nd, 2011
13:56
Thank you for advice I tray to write to (UK) Euro MP, but unfortunately has no answer from 12 mails I sent, I received no one.Maybe someone could give me a direct advice where I could write to with my case.
Dariusz Jablonski says:
October 2nd, 2011
10:27
Good Morning,Me and my lots friend have similar problem.Last 3 yeras I claim under Double taxation Treaty and everything was ok.In this years Hmrc start to investigatet us because they said then our Economic employer is Vroon who have bisnes in UK. I forgot said then my employer is Deeside Guernsey and they just borow me to Vroon copmany.I got information from my employer then just only Deeside Guernsey is my emloyer notihng more and my employer dissagre with hmrc.I send that info to hmrc but they ignore that and say they have noted but thye said then Vroon is my economic empoleyr!!I have contract directly from Deeside Guernsey.I found one lawyer in uk who tried to help me and he said will be better if we claim Under EU LAW because this argument is much stronger but i see that could be poroblem again.What we can do it because lot of us must pay back to hmrc plenty money but who have that.We thing this is discrimination people who are no resident in uk.What you can suggest us what should be our next steps.