UK Tax penalties

wealthmanagement

Tax penalties are one of the most frustrating and expensive mistakes you can make. They are issued to you in the UK when you need to file a tax return and HMRC have issued you with a filing requirement. [Read more…]

(how to avoid) The Superyacht Trap

crewFO-FP2A few months back we brought up the concept of the Superyacht Trap, something which a lot of you had never heard of but could immediately relate to. It turns out that there are hundreds if not thousands of you out there who are either caught in the trap, about to fall into it, or balancing on the edge of it. So, what can you do to either get out of it or avoid it in the first place? Let’s start with a story……

“A friend of mine” started working on Yachts a few years ago and loved it. He started out as a deckhand and, after doing a few courses and tickets found himself moving up the ranks. His first few years were spent “getting used to yachting” which basically meant researching what beers were sold in the bars of every port the yacht went in to. Months would regularly go by when he would reach pay day and not have anything left in the bank. It’s fine, I’m only 22 and have years left to save…

A couple more years passed by and he had to pay for some courses and also take some time off to do them (not all yachts pay for your training) and so this cleared out his savings. By the time he reached the level of 1st officer after 6 years in the industry he had some savings but not much else. Does any of this sound familiar to any of you yet?

By this point he was earning good money but also having a great time. Nights out were more expensive, regular dinners in expensive restaurants were becoming the norm. A nice motorbike at home (not his home!) and a really cool rental car when he was on holiday made it hard to save.

Then, one day he decided that he’d pretty much had enough of yachting. It had been 10 years, he had enjoyed his time but new opportunities beckoned and he left yachting and luckily ended up with a great job in yacht management. He left yachting without much in the way of savings, no property and a few small investments. Luckily for him he landed on his feet and managed to avoid the worst part of the Superyacht Trap because he found a good job.

This story is one of luck, definitely not good judgement, sense or wisdom. What would have happened if our friend had struggled to find a job? That’s simple, he would have fallen right into the Superyacht trap and been forced to go back to yachts…..

The Superyacht trap is something that hundreds if not thousands of Superyacht crew fall into so, if you are reading this now you have two options;

  • Avoid the trap in the first place, or
  • Work hard to get out of the trap

Avoiding the Superyacht Trap is easy if you are in the first couple of years of your career as you haven’t lost much time. Follow these steps to avoid the trap;

  1. Make a plan.
    1. Decide how long you are going to be in the industry for
    2. Work out what you want to achieve financially during that time. For example;
      1. Generate an income
      2. Buy a home outright
      3. Invest in a property portfolio
      4. Have a large pension
      5. All of the above
    3. Work out how to achieve all this. You will need some professional help with this as it involves calculating a variety of things such as;
      1. How much to invest and where
      2. How long your plans will take to achieve. Remember the quicker you want to achieve it the more you need to invest or the greater risk you may need to take
      3. How much can you afford. Be realistic. If you over commit this costs you your freedom in other areas.
  2. Stick to your plan.

If your plan is sensible and does not restrict you too much you will be able to stick with it. There are lots of crew these days who are really keen to invest for their future but you can go too far. After all, what’s the point of doing the job you do if you have no money each month to enjoy it? You do not need to save every penny you earn to make your future easier and avoid the Superyacht Trap.

Here’s a tip;

We’ve talked about all sorts of ways of you avoiding wasting your money from banking to cards, to Foreign exchange services. If you get all this right, as we have said before it will save you about 1 months salary per year. If you are filing tax returns and benefit from 0% income tax then this is 20% per year which we like to call “free money”.

So, look at it this way. If you can save 1 months salary per year plus 20% then that is a good plan. If you are new to the industry and earning €2500 per month then you should aim to save €8500 per year. If you are a Captain earning €12000 per month then you should be saving €40,800 per year. Base your savings on a % of your salary and you should find yourself in a good position at the end.

Remember this though, saving is great but you need to do something with the money. Your money needs to work for you all the time and so DO NOT just leave it in the bank. Make the most of it and this is where professional help comes in.

A great example of doing the right thing is a deck hand (let’s call him James) who joined us when he was 20 years old. This is what he did;

  1. James set up the right bank accounts and cards. The money he saves each month goes into a pension and an ISA. He bases this on 1 months salary per year and splits it between the two.
  2. He puts 20% of his salary into a high interest bank account back in the UK. Every month he converts this from Euros using an FX company and deposits into his high interest account. This is the deposit for his first house.
  3. After 3 years he was able to buy an investment property for £120,000 which is now rented out for £800 per month and covers the mortgage with some left over for any bills.
  4. As he is now earning more money, he is saving more and therefore putting more into his pension and savings account. By the end of next year he will be able to buy his second property at the age of 24 and probably his 3rd 18 months later.
  5. By the time James is 35 he will have achieved his goal of owning 6 rental properties generating £5000 per month in income.
  6. Once he has his 6 properties the money he saves will then be invested into short to medium term funds which will return greater growth on his money as he approaches his “exit point”
  7. By the time James is 38 he will be able to leave the yachting industry, retire and basically do whatever he likes for the rest of his life safe in the knowledge that he completely avoided the Superyacht Trap.

James is, without question the perfect example of what you can do with a career in the yachting industry (financially speaking)

Could you be James or do what he is doing? There is no reason why not.

If you are more like our “friend” and have been in the industry for years and are caught in the Superyacht trap there are still things you can do to get out of it. We will cover these next time.

If you would like to discuss your future (or your past) feel free to get in touch as it is always free to talk. Remember, we are ex-yacht crew and in case you hadn’t guessed our “friend” was me.

We look forward to helping you avoid the Superyacht Trap and making the most of your money.

info@crewfo.com

Please remember that nothing on this page constitutes financial advice and is a light-hearted look at the mistakes a lot of crew make along side some of the smart choices a very small number of others make.

French Social security changes

aboutuspageThe French authorities have recently issued an update on their social security position.

This update will impact Superyacht crew who spend time in French waters. If you are considered to have a residence in France by virtue of having spent a reasonable time in French waters (normally in excess of 183 days). This applies regardless of where your yacht is registered and under what flag it is flying. It also applies even if you are not paying French tax, for example, if you are paying tax in the UK.

There is an exception to this rule which applies Superyacht crew who would be eligible to pay social security in France. That is if they are paying social security in another country which has a relevant agreement with France. Specifically for most of our members that will be the UK.

Therefore, if you already make National insurance contributions in the UK and can prove that you do this you will not be asked to pay in France as well.

If you are looking to make social security contributions in the UK you should be completing the mariners’ questionnaire each year. This will establish what rate of social security you should be paying in the UK.

Mariners’ Questionnaire

The two options of social security applicable to Superyacht crew in the UK are Class 1 or Class 2.

Class 1 is worked out as a % of your earnings and is split into employers and employees liability with the rate at 13.8% and 12% respectively. Depending on how you have been paid the responsibility for the employer’s liability may also fall on you.

Class 1 is not voluntary and is calculated based on the answers provided in the questionnaire. However, you will likely only be liable to this if you have spent a significant amount of time in the , you are paid by a UK or Isle of Man registered company or the ship you work on is registered in the UK.

Class 2 is voluntary and is calculated at a rate of £2.80 a week. As a seafarer you can only make this payment once you have completed the questionnaire at the end of the tax year.

Disclaimer: The information in this post is for general guidance on your rights and responsibilities and is not legal advice. If you need more details on your position and the action you should take, please contact us or another adviser.