HM Revenue and Customs Brief 1/15 Tonnage Tax - qualifying ships and flagging
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Date issued 6 February 2015
Shipping companies that have elected to compute their
Corporation Tax profits from maritime transport activities calculated
under the rules for Tonnage Tax.
If a company in Tonnage Tax starts to operate a ship that is
not registered in a European Union (EU)
or European Economic Area (EEA)
member state, during financial year 2015 (the year starting 1 April
2015), then they must carry out a ‘flagging test’ to determine whether
the ship qualifies for Tonnage Tax.
registration of ships
Where a newly operated ship is registered (flagged) outside
the EU/EEA this may
affect whether it is a qualifying ship for Tonnage Tax purposes, unless
the year is an ‘excepted year’.
Tugs and dredgers, however, must always be registered in an EU/EEA Member State
to qualify for Tonnage Tax.
and the flagging test
Each year HM Revenue and Customs tests the tonnage of Tonnage
Tax ships on EU/EEA member
states’ registers, as a proportion of Tonnage Tax ships registered
As long as this proportion has not fallen from the previous
year’s calculation, the Treasury may make an order that the financial
year is an excepted year.
If the Treasury has not designated a year an excepted year,
companies and groups must apply a flagging test when they start to
operate a non EU/EEA registered
ship for the first time to determine if the ship qualifies for Tonnage
Tax. Details of the flagging test are in the Tonnage Tax manual at TTM03910.
If the conditions set out in the flagging test are met, the
ship will not be a qualifying ship for Tonnage Tax purposes. The
profits from a non-qualifying ship are taxed under the normal rules of
Financial year 2015
Overall, the number and tonnage of ships in Tonnage Tax has
decreased slightly in the last 12 months whilst companies have
increased the number of ships in Tonnage Tax that are on the registers
of countries that are not EU/EEA member
states. The proportion of EU/EEA tonnage has
therefore once again declined on average over a three year period.
Consequently, the Treasury is unable to designate the
financial year 2015 an excepted year.
Companies and groups must apply the test described above when
they start to operate a non-EU/EEA registered
ship during financial year 2015.
Member states registers
For the purposes of the flagging test ‘member states
registers’ means registers governed by the law of a member state
applying to their territories forming part of the European Union, and
also those of the 3 EEA
European Free Trade Association (EFTA) states:
In addition, the following registers are member states
registers for the purpose of the flagging test:
- the Danish International Register of Shipping (DIS)
- the German International Shipping Register (ISR)
- the Italian International Shipping Register
- the Madeira International Ship Register (MAR)
- the Canary Islands Register
- the Norwegian International Ship Register (NIS)
- the Gibraltar Register
The following registers are not considered to be member states
- the Kerguelen Register
- the Dutch Antilles’ Register
- the Isle of Man Register
- the Bermuda Register
- the Cayman Islands Register
About the Author
© Crown Copyright 2014.
A licence is needed to reproduce this article and has been republished
for educational / informational purposes only. Article reproduced by
permission of HM Revenue & Customs.
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Article Published/Sorted/Amended on Scopulus 2015-02-13 15:00:18 in Tax Articles