SolvedEIM33053 | Seafarers’ Earnings Deduction: attribution of earnings: effect of other deductions
From HM Revenue & Customs · Employment Income Manual
Section 381 ITEPA 2003
The 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.
Example
A seafarer has an eligible period ending on 5 November 2008. For the tax year 2008 to 2009, 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 (7/12 × £21,600).
Liability for the tax year 2008 to 2009 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 (7/12 × £24,000) plus pension contributions of £2,400 leaving only £7,600 taxable.