When I first joined the industry as a deckhand I had been advised rightly or wrongly at the time to get a captains letter and open an offshore account. I noticed that all of my other crew members were doing this and so I simply followed suit. I chose not to return to the UK for more than a few weeks a year as I considered it was essential for me to be non-resident. I would always worry when passing through customs that I would be stopped and asked about my tax situation. I knew very little at the time about residency laws but always feared that I had somehow exceeded the number of days I was allowed to spend in the UK so refused to seek guidance. I had convinced myself that I would lose all my money to tax and as I had not put any by it was best to delay things by another year until I had saved up.
It was my mortgage broker who eventually forced my hand and reluctantly made me submit my first set of tax returns. It quickly dawned on me in my first meeting with him that I didn’t exist in the system so why would anyone seriously consider lending me money. I was asked the usual round of questions; do you have any CCJs, credit card debts etc each of which I casually brushed aside. I was then asked if I would be able to provide an SA? An SA what did you say? Why an SA302 letter, to show proof of earnings. I was obviously unable to produce this letter as I had, until then, always opted out of submitting an annual tax return.
I left the meeting with my broker slightly defeated but determined I wouldn’t be beaten. The very next morning I walked into my accountants office and came clean to him about my situation. I actually breathed a deep cathartic sigh of relief after divulging my personal financial details to someone who at last could help me. The information he provided was clear, concise and even though he did not like the muddled world of offshore banking he decided to accept me as a client.
After leaving the meeting friends in the industry immediately wanted to know what the outcome was which I explained. If you are a UK resident working on foreign going yachts and spend less than 183 days a tax year ashore, you can declare all of your foreign earnings without them being subject to tax. I had little idea before then that the UK had a specific tax exemption for Seafarers known as the Seafarers Earnings Deduction (SED). This news immediately put my mind at rest. I could at last declare all my income which would be sufficient to get the mortgage I required. The inevitable tax bill I had always feared was no more. This meant that I could hold onto the deposit that I had worked tirelessly to save for.
My accountant then requested that I provide him with the following information so that he could apply for a Unique Taxpayer Reference number:
- Full Name
- Date of Birth
- UK Address
- UK Telephone Number
- National Insurance Number
I was unsure what this number was for but after a little research I realised that I needed this to file under self assessment scheme which the SED is a sub section of. It was real nuisance having to provide all this information and I have to admit at times I felt like giving up, but I was told that in order to complete my return I would need to provide this:
- Bank Statements
- Details of any rental income or investments
- Number of Days in the UK per tax year
- Name & Address of Employer(s)
- Name of Vessel(s)
After several weeks at home and numerous house viewings a letter arrived in the post from HMRC. I was terrified as I opened it as I still did not believe that the SED really existed and that I would evidently be faced with an enormous tax bill. The letter contained my UTR number and requested that I submit a return for the last tax year. I immediately dropped this off to my accountant and he assured me once again that there was nothing to worry about.
My tax return was completed that week and on the Friday I walked into my accountants office to sign the hard copy. I feverishly flicked through the pages of the return to see how much tax I really owed. I looked again and again at the number but it still showed zero. In addition my accountant informed me that he had claimed back the tax that had been taken from my rental income and bonds. Ironically this was the same amount that he charged for his services.
A week later my SA302 letters arrived in the post. I drove straight to my brokers office to deposit them on his desk before heading off for Ramsgate Week. I remember coming in from sailing that afternoon and noticing that I had missed a call from my broker and the lucky red band I always wore around my wrist had broken off. I called my broker to discover that the lender had given me a decision in principle. I bought a flat 4 weeks later!!
My advice to anyone who is still waiting to act, relying on the advice of their peers would be to speak with someone who specialises in this field. It certainly helped me and the system is very straightforward if handled by the right firm.