SCHEDULES

SCHEDULE 22 Tonnage tax

Part VII The ring fence: general provisions

Meaning of “finance costs"

63

1

For the purposes of paragraphs 61 and 62 “finance costs” means the costs of debt finance.

2

In calculating the costs of debt finance, the matters to be taken into account include—

a

any costs giving rise to a trading or non-trading debit under F4Part 5 of the Corporation Tax Act 2009 (loan relationships);

F1b

any credit or debit falling to be brought into account F5in accordance with Part 7 of the Corporation Tax Act 2009 (derivative contracts) in relation to debt finance;

c

any exchange gain or loss within the meaning given by F6section 475 of the Corporation Tax Act 2009 in relation to debt finance;

d

the finance cost—

i

implicit in a payment under a finance lease, or

ii

payable on debt factoring or any similar transaction;

F3dd

where the tonnage tax company is the lessee under a long funding operating lease, the amount deductible (or the total amount that could, if there were no tonnage tax election, be deductible) in respect of payments under the lease in computing the profits of the lessee for the purposes of corporation tax (after first making against any such amount any reductions falling to be made by virtue of F7section 379 of the Corporation Tax Act 2010); and

e

any other costs arising from what would be considered on normal accounting principles to be a financing transaction.

3

No adjustment shall be made under paragraph 61 or 62 if, in calculating for a period the company’s, or as the case may be, the group’s deductible finance costs outside the ring fence, the amount taken into account in respect of costs and losses is exceeded by the amount taken into account in respect of profits and gains.

F24

In this paragraph “long funding operating lease” means a long funding operating lease for the purposes of Part 2 of the Capital Allowances Act (see section 70YI(1) of that Act).