SE70220 – Tax treatment of seafarers: salvage awards

A salvage award is apportioned between the owners and the members of the crew of the salving ship on a basis which varies with the particular circumstances of each salvage. Salvage awards are fully taxable.

The award may be agreed on the salvor's behalf with the owners of the vessel but increasingly seamen are seeking to negotiate their own settlements, sometimes through the Courts.

Where an award is paid to the owners of the salving ship for distribution among the crew the owner should include each employee's share on the deductions working sheet and operate PAYE on it. Where an award is made by the Courts it is usual for it to be paid over to the salvor's solicitors and in such cases PAYE will not be operated and it will be necessary to raise a Schedule E assessment to collect the tax due from the individual to whom it is paid. Where examination of the accounts of a ship owner shows that a share of an award has been paid to the owner, he should be asked to supply an analysis of the payments made to seamen unless:

• such a return has already been made to Cardiff 1 District or
• the awards have been included on the deductions working sheets and taxed.

If a return is then made the appropriate Districts should be notified of the circumstances of the awards and a note of the facts passed to Cardiff 1.