Existing shipping companies and groups have a new opportunity to elect into the Tonnage Tax regime for Corporation Tax between 1 June 2023 and 30 November 2024.
The Tonnage Tax regime is an alternative method of calculating Corporation Tax for companies.
Rather than Corporation Tax being paid on shipping trade profits, under the Tonnage Tax rules, tax is calculated at a flat rate based on the net tonnage of the ships operated.
Election opportunity
Companies and groups operating qualifying ships are normally only allowed to elect into Tonnage Tax during the 12 months from the date they first qualify.
Following Changes made to the regime by Finance Act 2022, from 1 April 2022, a new Tonnage Tax election opportunity has been made available:
- Existing shipping companies and groups meeting the Tonnage Tax qualifying conditions can elect into the regime between 1 June 2023 and 30 November 2024.
Elections are made for an initial period of eight years (ten years prior to 1 April 2022).
Tonnage Tax: further details
To be eligible to use the Tonnage Tax regime, there are a number of qualifying conditions.
Companies must operate qualifying ships that are ‘strategically and commercially managed in the UK’.
Qualifying ships must be seagoing, at least 100 gross tons, and used for:
- Carriage by sea of passengers.
- Carriage by sea of cargo.
- Towage, salvage or other marine assistance carried out at sea.
- Transport by sea in connection with other services of a kind necessarily provided at sea.
A number of ships are excluded from the regime. These include:
- Fishing vessels.
- Pleasure craft.
- Harbour or river ferries.
- Vessels where their main purpose is to provide goods or services normally provided on land (e.g. floating hotel or supermarket).
There are a number of detailed rules which cover which profits are included within the regime.
A profit for each day a ship is operated (owned by, or chartered to, the company) is calculated using the following table before Corporation Tax is applied to it:
|
For each complete 100 net tons up to 1,000 |
£0.60 |
|
For each complete 100 net tons from 1,001 to 10,000 |
£0.45 |
|
For each complete 100 net tons from 10,001 to 25,000 |
£0.30 |
|
For each complete 100 net tons above 25,000 |
£0.15 |
Example: for 365 days the tonnage tax profit of a singleton company with a 150 net ton supply vessel would be £219 (£0.60 x 1 x 365). With a 19% Corporation Tax rate, the tax payable would be £41.61.
Useful guides on this topic
Finance Act 2022: tax update & rolling planner 2022-23
This rolling planner tracks the key tax announcements that impact the 2022-23 tax year and beyond. This planner is updated on an ongoing basis.
External link
The Tonnage Tax (Further Opportunity for Election) Order 2023
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