HM Revenue and Customs Brief 04/08
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Issued 12 February 2008
Tonnage Tax – Registration of ships in Member States
This Revenue & Customs Brief is relevant to those companies that have elected
to have their corporation tax profits from the maritime transport activities of
qualifying ships calculated under the rules of Tonnage Tax.
During financial year 2008 companies in Tonnage Tax starting to operate a
ship for the first time will have to carry out an additional test to see if the
ship qualifies for Tonnage Tax. Companies may find that some ships, not
registered in a member state, do not qualify for Tonnage Tax.
Background: registration of ships
When the Tonnage Tax regime was introduced in FA 2000 where a vessel was
registered, or 'flagged', did not affect whether or not it was a qualifying
vessel for Tonnage Tax purposes.
The Tonnage Tax regime was amended by Finance Act 2005, which introduced
legislation on where vessels are registered (Sections 22A to 22F Finance Act
2000). This legislation means that where a ship is registered can affect whether
or not it is a qualifying vessel for Tonnage Tax purposes.
There are special rules for tugs and dredgers. Only tugs and dredgers
registered in a member state can qualify for Tonnage Tax.
For other ships, where the overall proportion of vessels in Tonnage Tax that
are registered on the registers of EU/EEA member states is not decreasing then
the legislation allows the Treasury to designate a year as an 'excepted year'.
In an excepted year the legislation is not applied on a company by company
In other years, companies and groups have to apply a test when they start to
operate a vessel for the first time. If the conditions are met, then the
additional vessel is not a qualifying ship for Tonnage Tax purposes and the
profits from that ship are taxed under the normal rules of corporation tax.
The financial years 2005, 2006 and 2007 have been designated as excepted
Flagging rules for financial year 2008
The growth in the number of ships in Tonnage Tax has continued, but the
tonnage of ships registered in member states has grown at a much lower rate than
those registered elsewhere.
As a result the overall proportion of ships registered in member states has
declined. This means that financial year 2008 will not be an excepted year and,
when companies/groups start to operate a ship, where it is registered may affect
whether or not it is a qualifying ship for Tonnage Tax purposes.
HMRC is publishing its draft guidance (PDF 61K) on the application of the
flagging legislation (PDF 61K).http://www.hmrc.gov.uk/briefs/company-tax/flagging-guidance-tonnage-tax.pdf
Where companies in Tonnage Tax or their agents have any comments on the draft
guidance, for example where they consider that an aspect has not been covered by
the guidance, then they should contact:
email: Nick Gibb
Comments should be made by 30 April 2008.
The finalised version of the guidance, incorporating any changes made as a
result of the feed-back, will be published in the Tonnage Tax Manual.
About the Author
© Crown Copyright 2008.
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Article Published/Sorted/Amended on Scopulus 2008-02-13 17:58:57 in Tax Articles