UK Superyacht Crew: Do you file a Tax Return?
Over the last few years the Tax Return has been the most popular subject amongst Superyacht Crew. Your responsibilities and liabilities when it comes to tax, offshore income and ensuring you are on the right side of the tax man have been a major source of confusion.
If you are British and work on a Superyacht you are the envy of every other nationality in Yachting. From a tax point of view that is! Hopefully most UK crew understand why. But for those of you who don’t, and it’s a surprisingly large number please read on. Learn something here and take action before it gets you in trouble for absolutely no reason.
Let’s go back to when you started on yachts. A Lot of you were told by a captain, friend, or other crew member to:
- Open an offshore account
- Get paid into your offshore account
- Keep your money hidden there
- Do your best not to exist
This has long been the attitude to banking and paying tax for two reasons;
1. Everyone thought they were supposed to pay tax and so, with the benefit of offshore banks did their best to hide their earnings
2. They did it because everyone else did.
The reality of the situation is this. You probably don’t have a tax liability and so what are you hiding? Working offshore as a UK resident seafarer (as long as you stay within the guidelines) carries with it the benefit of 0% income tax.
So let’s look at this one point at a time;
Why do you bank offshore?
Most people bank offshore because someone else told them to. It’s that simple but also that ridiculous. The reason Yacht crew got into this habit goes back years and it is all about tax. Crew thought that if they banked offshore the tax man wouldn’t be able to see how much they earned.
- This WAS true but isn’t anymore. Offshore banks tell the tax authorities EVERYTHING. So, don’t think you are getting away with anything.
- If you are British you have absolutely no reason to hide anything.
- As long as you declare your income each year by doing a tax return you will have a £0 tax bill.
- The only time you can have a problem is if you DO NOT do a tax return. Then the tax man may assume you have something to hide, or worse still fine you for it.
There is only one good reason to bank offshore and that is for the multi currency bank accounts. However, even these are expensive. Also they don’t pay interest and do nothing for your credit rating.
Lots of UK based banks do exactly the same thing as offshore these days. But, they are free and better for your credit rating.
Why do a tax return if I don’t owe anything?
The big problem here is why crew think their salary is tax free. From talking to a lot of crew these are the reasons we have heard;
- Nobody takes tax from my salary
- I do not work in any country therefore don’t owe tax to anyone
- The flag of the yacht I work on is Cayman and the Cayman Islands has no income tax
- My friends told me I don’t have to pay tax.
The reality is this. Your salary is tax free for the following reasons (remember, we are talking about British crew)
- You are a British resident
- You work on a vessel offshore
- The vessel does not spend time in UK waters
- You spend less than 183 days per tax year in the UK
There are a number of other technical rules too but we won’t go into these today.
BUT, none of this matters unless you;
Do a Tax return
Filing a tax return each year is your way of notifying HMRC what you do for a living. Also, how much you earn, and that you qualify for no income tax. Remember this, if you don’t tell them what you do, how can HMRC possibly know?
Also remember this. If you earn offshore income it is now a legal requirement to declare this. This is YOU, so pay attention.
Declaring your income: (doing a tax return)
- You are in the tax system
- There will be no to pay tax (assuming you do not spend too much time in the UK)
- Proof of earnings (essential for mortgages and loans these days)
- You will build your credit rating
- No concerns about the tax man knocking on your door
- It sets you up for the future
- A tax return will cost you around £200 per year
- You need to keep records of time in and out of the country
Not declaring your income: (not doing a tax return aka burying your head in the sand!)
- No tax to pay, YET
- You do not pay to do a tax return
- Save £200 per year
- You will get caught
- When you do get caught you will be fined for not declaring offshore income (fines can be in the £1000’s)
- When you get caught you could be charged with tax evasion (by not declaring your income it will be assumed you have something to hide) and possibly end up with a criminal record.
- No financial footprint in the UK
- Poor credit rating
- Worry about the tax man catching up with you (he will by the way!)
- The worst part of this is that you would have had no tax to pay in the first place so why hide?
What do I do?
I know there is a lot to take in here but this is all you need to know;
If you are British and work on a Superyacht you MUST declare your income every year by way of a tax return. It’s that simple.
By the way, tax returns is one of the many services Crew Family Offer provide for Superyacht Crew. If you aren’t doing it yet get in touch so we can help you do the right thing.