Glenn Heath
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Foreign Earnings Deduction and Personal Company

Foreign Earnings Deduction and Personal Company

I have had a rash of ex Servicemen considering employment on anti piracy duties on merchant ships.

It is likely that they will form a company to sub contract to the main contractor.

On the assumption that the 100% FED for Seafarers is availble, would it be the case that remuneration from their company could effectively be paid free of tax (Ignoring NIC implications)?

This seems to good to be true - am I missing something obvious?


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16th Nov 2011 10:14

Corporation tax

The FED is only available to individuals so the Company would still be liable to Corporation tax wouldn't it? The company would still have to deduct tax under PAYE when paying the employees and the individuals could then claim FED as seafarers.

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16th Nov 2011 14:21

Unless self -employed

If they would be classed as Self-Employed then they wouldn't be able to claim SED unless they used an Umbrella company and were employees of that. Some Specialist companies offer this service (for a fee of course) if they don't want to set up their own...

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06th Dec 2011 12:21

Seafarer's Earnings Deduction

It is clear that many of the companies providing the security to the ships do not want to take the risk of  NIC and they are refusing now either employ the personnel direct or even as self-employed security consultants.  They are forcing them to make a decision on umbrella companies or their own one man companies; in both cases passing the risk to the personnel. 


Previously many of them were on self-employed contracts, which if HMRC applied the tests as they do for the construction industry and other sectors, would have been disregarded and they would have been deemed to be employees.  That is another reason for this change.

The danger is that people who would have qualified for SED as employees or through inappropriate SE contracts will now have additional costs for the same gross payment and may now lose their SED because HMRC may find it convenient to say that thet were self-employed.


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