EIM33053 - Seafarers� Earnings Deduction: attribution of earnings: effect of other deductions
Section 381 ITEPA 2003
»Ê¹ÚÌåÓýapp deduction is available only against the net earnings attributable to the eligible period.
»Ê¹ÚÌåÓýapp net earnings are amounts remaining after deductions for:
- pension contributions
- allowable expenses and
- capital allowances.
»Ê¹ÚÌåÓýapp 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.
»Ê¹ÚÌåÓýapp 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 | Ìý |
|---|---|---|
| Pension | £2,400 | Ìý |
| Seafarersâ€� deduction | £12,600 | Ìý |
| Ìý | £15,000 | £15,000 |
| Net taxable earnings | £9,000 | Ìý |
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.