More Than a Captain

by: Tom Andrews, CPA

This goes without saying but the term Yacht Captain is probably the most understated job title in the luxury yacht industry. The profession is so much more involved than taking the vessel from one destination to another.  Many captains are hired only to find themselves a part time captain and a full time yacht manager.  Some captains embrace the role of manager even going so far as to “baby sit” unused vessels.  While the added responsibility can be negotiated as part of the compensation package there is also a risk that certain liabilities may be thrust onto the Captain.

When Captains find themselves filling the role as a manager they are normally on small or medium sized programs. More often than not the larger programs are controlled by a management company, these large management companies tend to run every aspect of the vessel including but not limited to MLC compliance, payroll, crew placement, accounting, itinerary, etc. After the large and medium management companies you will find “small managers”, these are typically one or two man management companies being run by a former or current captain.  These “mini” or “small” managers provide services to small vessels that may have a few or no crew at all.  In some cases the owner only uses the vessel part time so they need a captain to check up on the boat while the vessel is not in use. 

It should be noted that the administrative and tax burdens of the smaller operations can be just as sophisticated as some of the larger programs. Sometimes the roll of a manager will start out simple enough, the owner just needs someone to stop by the vessel once a week to clean and check the systems, then the owner asks that manager to hire day crew so they may use the vessel, then the owner asks the manager to provision the vessel or make small repairs to the vessel, before you know it the manager is in charge of all aspects of this program including the vessel payroll and accounting, all the while the owner is insisting that these services be run through the managers company or bank account.

As an accountant I have consulted with clients that have undertaken these responsibilities only to come to our office years later asking if they are in compliance with all of the tax laws. In many cases we realize that the client has been collecting and remitting sales tax from the owner or that they have not been issuing 1099’s to the day laborers, withholding tax from nonresident crewmembers or any number of compliance responsibilities that the mini manager would have ordinarily been responsible to take care of.

We typically recommend that these smaller managers pay close attention and consult with the appropriate legal and accounting professionals to determine if any of the services that they are providing will require special compliance considerations. If it turns out that you should be filing sales tax reports, payroll tax reports, 1099’s or crew contracts you can avoid a big headache down the line by keeping compliant in the first place.  Even the smallest yacht programs can spend millions of dollars and the exposure to the manager cannot be understated.

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