SCHEDULES

SCHEDULE 22 U.K. Tonnage tax

Part III U.K. Qualifying companies and groups

Qualifying companies and groups U.K.

16 (1) For the purposes of this Schedule a company is a “qualifying company” if— U.K.

(a) it is within the charge to corporation tax,

(b) it operates qualifying ships, and

(c) those ships are strategically and commercially managed in the United Kingdom.

(2) A “qualifying group” means a group of which one or more members are qualifying companies.

Effect of temporarily ceasing to operate qualifying ships U.K.

17 (1) This paragraph applies where a company temporarily ceases to operate any qualifying ships. U.K.

It does not apply where a company continues to operate a ship that temporarily ceases to be a qualifying ship.

(2) If the company gives notice to the Inland Revenue stating—

(a) its intention to resume operating qualifying ships, and

(b) its wish to remain within tonnage tax,

the company shall be treated for the purposes of this Schedule as if it had continued to operate the qualifying ship or ships it operated immediately before the temporary cessation.

(3) The notice must be given not later than the date which is the filing date for the company’s company tax return for the accounting period in which the temporary cessation begins.

“Filing date” and “company tax return” here have the same meaning as in Schedule 18 to the M1 Finance Act 1998.

(4) This paragraph ceases to apply if and when the company—

(a) abandons its intention to resume operating qualifying ships, or

(b) again in fact operates a qualifying ship.

Marginal Citations

M1 1998 c. 36.

Meaning of operating a ship U.K.

18 (1) A company is regarded for the purposes of this Schedule as operating any ship owned by, or chartered to, the company, subject to the following provisions. U.K.

(2) A company is not regarded as the operator of a ship where part only of the ship has been chartered to it.

For this purpose a company is not to be taken as having part only of a ship chartered to it by reason only of the ship being chartered to it jointly with one or more other persons.

(3) A company is not regarded as the operator of a ship that has been chartered out by it on bareboat charter terms, except as provided by the following provisions.

(4) A company is regarded as operating a ship that has been chartered out by it on bareboat charter terms if the person to whom it is chartered is not a third party.

For this purpose a “third party” means—

(a) in the case of a single company, any other person;

(b) in the case of a member of a group—

(i) any member of the group that is not a tonnage tax company (and does not become a tonnage tax company by virtue of the ship being chartered to it), or

(ii) any person who is not a member of the group.

(5) A company is not regarded as ceasing to operate a ship that has been chartered out by it on bareboat charter terms if—

(a) the ship is chartered out because of short-term over-capacity, and

(b) the term of the charter does not exceed three years.

(6) A company is regarded as operating a ship that has been chartered out by it on bareboat charter terms if the ship—

(a) is registered in the United Kingdom, and

(b) is in the service of a government department by reason of a charter by demise to the Crown,

and there is in force under section 308(2) of the M2 Merchant Shipping Act 1995 an Order in Council providing for the registration of government ships in the service of that department.

In this sub-paragraph “government department” includes a Northern Ireland department.

Marginal Citations

M2 1995 c. 21.

Qualifying ships U.K.

19 (1) For the purposes of this Schedule a “qualifying ship” means, subject to sub-paragraph (2), a seagoing ship of 100 tons or more gross tonnage used for— U.K.

(a) the carriage [F1 by sea] of passengers,

(b) the carriage [F2 by sea] of cargo,

(c) towage, salvage or other marine assistance [F3 carried out at sea], or

(d) transport [F4 by sea] in connection with other services of a kind necessarily provided at sea.

(2) A vessel is not a qualifying ship for the purposes of this Schedule if the main purpose for which it is used is the provision of goods or services of a kind normally provided on land.

(3) Sub-paragraph (1) is also subject to

[F5 (a)] paragraph 20 (vessels excluded from being qualifying ships);

[F6 (b) paragraph 20A (qualifying dredgers and tugs);

(c) paragraphs 22A to 22F (flagging).]

(4) For the purposes of this paragraph a ship is a seagoing ship if it is certificated for navigation at sea by the competent authority of any country or territory.

[F7 (5) For the purposes of sub-paragraph (1) “sea” does not include—

(a) a port or harbour;

(b) an estuary, a tidal or other river or an inland waterway.]

Textual Amendments

F1 Words in Sch. 22 para. 19(1)(a) inserted (1.7.2005) by Finance Act 2005 (c. 7), Sch. 7 paras. 4(2)(a), 18(1) (with Sch. 7 paras. 19-21)

F2 Words in Sch. 22 para. 19(1)(b) inserted (1.7.2005) by Finance Act 2005 (c. 7), Sch. 7 paras. 4(2)(b), 18(1) (with Sch. 7 paras. 19-21)

F3 Words in Sch. 22 para. 19(1)(c) inserted (1.7.2005) by Finance Act 2005 (c. 7), Sch. 7 paras. 4(2)(c), 18(1) (with Sch. 7 paras. 19-21)

F4 Words in Sch. 22 para. 19(1)(d) inserted (1.7.2005) by Finance Act 2005 (c. 7), Sch. 7 paras. 4(2)(d), 18(1) (with Sch. 7 paras. 19-21)

F5 Word in Sch. 22 para. 19(3) inserted (1.7.2005) by Finance Act 2005 (c. 7), Sch. 7 paras. 4(3)(a), 18(1) (with Sch. 7 paras. 19-21)

F6 Sch. 22 para. 19(3)(b), (c) inserted (1.7.2005) by Finance Act 2005 (c. 7), Sch. 7 paras. 4(3)(b), 18(1) (with Sch. 7 paras. 19-21)

F7 Sch. 22 para. 19(5) inserted (1.7.2005) by Finance Act 2005 (c. 7), Sch. 7 paras. 4(4), 18(1) (with Sch. 7 paras. 19-21)

Vessels excluded from being qualifying ships U.K.

20 (1) The following kinds of vessel are not qualifying ships for the purposes of this Schedule— U.K.

(a) fishing vessels or factory ships;

(b) pleasure craft;

(c) harbour or river ferries;

(d) offshore installations;

(e) tankers dedicated to a particular oil field;

[F8 (f) dredgers other than qualifying dredgers.]

(2) In sub-paragraph (1)(a) “factory ship” means a vessel providing processing services for the fishing industry.

(3) In sub-paragraph (1)(b) “pleasure craft” means a vessel of a kind whose primary use is for the purposes of sport or recreation.

(4) In sub-paragraph (1)(c) “harbour or river ferry” means a vessel used for harbour, estuary or river crossings.

F9 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) For the purposes of sub-paragraph (1)(e) whether a tanker is dedicated to a particular oil field shall be determined in accordance with section 2 of the M3 Oil Taxation Act 1983 (dedicated mobile assets).

[F10 (7) In this Schedule “qualifying dredger” means a dredger which—

(a) is self-propelled, and

(b) is constructed or adapted for the carriage of cargo;

(but see further paragraph 20A).]

Textual Amendments

F8 Sch. 22 para. 20(1)(f) substituted (1.7.2005) by Finance Act 2005 (c. 7), Sch. 7 paras. 5(2), 18(1) (with Sch. 7 paras. 19-21)

F9 Sch. 22 para. 20(5) repealed (22.7.2004) (with effect in accordance with Sch. 27 para. 7(2) of the amending Act) by Finance Act 2004 (c. 12), Sch. 27 para. 7(1), Sch. 42 Pt. 2(19)

F10 Sch. 22 para. 20(7) inserted (1.7.2005) by Finance Act 2005 (c. 7), Sch. 7 paras. 5(3), 18(1) (with Sch. 7 paras. 19-21)

Marginal Citations

M3 1983 c. 56.

[F11 Qualifying dredgers and tugs U.K.

Textual Amendments

F11 Sch. 22 para 20A and cross-heading inserted (1.7.2005) by Finance Act 2005 (c. 7), Sch. 7 paras. 6, 18(1) (with Sch. 7 paras. 19-21)

20A (1) This paragraph applies where a company operates a ship in an accounting period and the ship— U.K.

(a) is a qualifying dredger or a tug, and

(b) would, apart from this paragraph, be a qualifying ship.

(2) The ship shall not be regarded as a qualifying ship operated by the company in that accounting period unless it is used for one or more of the activities mentioned in paragraph 19(1)(a) to (d) for more than 50% of its operational time.

(3) In this paragraph “operational time”, in relation to a ship operated by a company in an accounting period, means the time during that accounting period during which the ship is—

(a) operated by the company, and

(b) used for any activity.

(4) For the purposes of sub-paragraph (2) assisting a self-propelled vessel into or out of a port or harbour is not to be regarded as use for an activity mentioned in paragraph 19(1)(c).

(5) For the purposes of sub-paragraph (3) any waiting time spent by a tug for the purposes of a particular activity is to be treated as time during which the tug is used for that activity.]

Power to modify exclusions U.K.

21 U.K.The Treasury may make provision by order amending paragraph 20 so as to add any description of vessel to, or remove any description of vessel from, the kinds of vessel that are excluded from being qualifying ships for the purposes of this Schedule.

Effect of change of use U.K.

22 (1) A qualifying ship that begins to be used [F12 for non-qualifying purposes] ceases to be a qualifying ship when it begins to be so used, subject to the following provisions. U.K.

(2) If—

(a) a company operates a ship throughout an accounting period of the company, and

(b) in that period the ship is used [F13 for non-qualifying purposes] on not more than 30 days,

that use shall be disregarded in determining whether the ship is a qualifying ship at any time during that period.

(3) In the case of an accounting period shorter than a year, the figure of 30 days in sub-paragraph (2) shall be proportionately reduced.

(4) If a company operates a ship during part only of an accounting period of the company, sub-paragraph (2) has effect as if for “30 days", or the number of days substituted by sub-paragraph (3), there were substituted the number of days that bear to the length of that part of the accounting period the same proportion that 30 days does to a year.

(5) In this paragraph references to use [F14 for non-qualifying purposes are to—

(a) use for an activity other than any of the activities mentioned in paragraph 19(1)(a) to (d), or

(b)] use as a vessel of a kind excluded by paragraph 20 from being a qualifying ship.

[F15 (6) This paragraph does not apply for the purposes of sub-paragraphs (2) to (5) of paragraph 20A (qualifying dredgers and tugs).]

Textual Amendments

F12 Words in Sch. 22 para. 22(1) substituted (7.4.2005) by Finance Act 2005 (c. 7), Sch. 7 paras. 7(2), 18(2)

F13 Words in Sch. 22 para. 22(2)(b) substituted (7.4.2005) by Finance Act 2005 (c. 7), Sch. 7 paras. 7(3), 18(2)

F14 Words in Sch. 22 para. 22(5) substituted (7.4.2005) by Finance Act 2005 (c. 7), Sch. 7 paras. 7(4), 18(2)

F15 Sch. 22 para. 22(6) inserted (7.4.2005) by Finance Act 2005 (c. 7), Sch. 7 paras. 7(5), 18(2)

[F16 Flagging: rule for ships other than dredgers and tugs U.K.

Textual Amendments

F16 Sch. 22 paras. 22A-22C and cross-headings inserted (1.7.2005) by Finance Act 2005 (c. 7), Sch. 7 paras. 8, 18(1) (with Sch. 7 paras. 19-21)

22A (1) This paragraph applies if the following conditions are satisfied in the case of a ship which— U.K.

(a) is neither a qualifying dredger nor a tug, and

(b) would, apart from this paragraph, be a qualifying ship.

(2) Condition 1 is that, at a time after the later of the reference date (see paragraph 22B(1)) and 30th June 2005,—

(a) in the case of a tonnage tax company which is a single company, the company begins, in a financial year which is not excepted (see paragraph 22B(2)), to operate the ship for the first time, or

(b) in the case of a tonnage tax company which is a member of a tonnage tax group, the company begins, in a financial year which is not excepted, to operate the ship for the first time, the ship not having previously been operated by any other member of the group.

(3) Condition 2 is that less than 60% of the company's total tonnage is Community-flagged (see paragraph 22B(3)) on average over the period—

(a) beginning with the first day of the financial year mentioned in condition 1, and

(b) ending with the day on which the company so begins to operate the ship.

(4) Condition 3 is that—

(a) the percentage of the company's total tonnage which is Community-flagged on average over the period mentioned in condition 2,

is less than

(b) the percentage of the company's total tonnage which was Community-flagged on the reference date.

(5) Condition 4 is that, on the date on which the company so begins to operate the ship, the ship is not registered in one of the Member States' registers (see paragraph 22B(7)).

(6) Where this paragraph applies in relation to the ship, the ship shall not, at any time on or after that date, be regarded as—

(a) a qualifying ship operated by the company, or

(b) if immediately before that date the company is a member of a tonnage tax group, a qualifying ship operated by any company that is or becomes a member of the group.

(7) But sub-paragraph (6) does not apply if—

(a) the ship has become registered in one of the Member States' registers by the end of the period of three months beginning with that date, or

(b) the conditions in sub-paragraph (8) are satisfied.

(8) Those conditions are that—

(a) a substitute ship which was not registered in one of the Member States' registers has, during the period mentioned in sub-paragraph (7)(a), become so registered, and

(b) no later than the end of that period—

(i) if the company is a single company, the company makes an election under this sub-paragraph in relation to the substitute ship, or

(ii) if the company is a member of a tonnage tax group, all the qualifying companies in the group jointly make such an election.

(9) In sub-paragraph (8) a “substitute ship” means a qualifying ship—

(a) the tonnage of which is no less than that of the ship mentioned in sub-paragraph (1), and

(b) which was first operated by the company or, if the company is a member of a tonnage tax group, by any other member of the group more than three months before that date;

and for this purpose the tonnage of a ship is to be determined on the same basis as it is under paragraph 22B(3).

(10) An election under sub-paragraph (8) is made by notice to the Inland Revenue.

Flagging: meaning of terms used in paragraph 22A U.K.

22B (1) In paragraph 22A “the reference date” means 17th January 2004 or, if later,— U.K.

(a) in the case of a single company, the date of the end of the accounting period in which the company became (or becomes) a tonnage tax company;

(b) in the case of a member of a group, the date of the end of the accounting period in which the group became (or becomes) a tonnage tax group;

but where the members of a group had (or have) different accounting periods at the time the group became (or becomes) a tonnage tax group, paragraph (b) has effect by reference to the first of those accounting periods.

(2) For the purposes of sub-paragraph (2) of paragraph 22A a financial year is excepted if it is designated by an order made by the Treasury as a financial year in relation to which that paragraph is not to have effect (see further paragraph 22C(1) to (3)).

(3) For the purposes of paragraph 22A the percentage of a company's total tonnage which is Community-flagged is—

(CFT/TT) x 100

where—

CFT is the aggregate tonnage of such of the relevant ships as are registered in one of the Member States' registers, and

TT is the aggregate tonnage of all the relevant ships.

(4) For the purposes of sub-paragraph (3) the ships which are the relevant ships are—

(a) if the company is a single company, the ships operated by the company, or

(b) if the company is a member of a tonnage tax group, the ships operated by each member of the group which is a qualifying company.

(5) Sub-paragraphs (3) and (4) are subject to any regulations made under paragraph 22C(4).

(6) A ship shall not be counted more than once in determining for the purposes of sub-paragraph (3) the aggregate tonnage of relevant ships.

(7) In this Schedule “Member States' registers” has the meaning given by the Annex to Commission communication C(2004) 43 — Community guidelines on State aid to maritime transport (as from time to time amended or replaced).

Flagging: provisions supplementing paragraphs 22A and 22B U.K.

22C (1) An order under paragraph 22B(2) designating a financial year shall be made if— U.K.

(a) the Treasury are satisfied, on the basis of the information available to them, that the percentage of the tonnage tax fleet which is Community-flagged has not decreased on average over a prescribed three year period, and

(b) the order is made before the beginning of that financial year.

(2) The Treasury may make provision by regulations for or in connection with—

(a) specifying the meaning, for the purposes of sub-paragraph (1)(a), of the percentage of the tonnage tax fleet which is Community-flagged;

(b) specifying the way in which an average is to be calculated for those purposes;

(c) requiring any tonnage tax company or tonnage tax group to provide prescribed information for the purposes of enabling the Treasury to determine whether the condition in sub-paragraph (1)(a) is met;

(d) imposing penalties in respect of a failure to comply with a provision of the regulations made by virtue of paragraph (c) (including, in prescribed cases or circumstances, the exclusion of a company or group from tonnage tax).

(3) Section 828(3) of the Taxes Act 1988 shall not apply in relation to an order under paragraph 22B(2).

(4) The Treasury may make provision by regulations as to the way in which the percentage of a company's total tonnage which is Community-flagged is to be calculated for the purposes of paragraph 22A.

(5) The provision that may be made by regulations under sub-paragraph (4) includes provision for or in connection with—

(a) determining the percentage of a company's total tonnage which is Community-flagged on average over a period;

(b) specifying the basis on which the tonnage of a ship is to be determined;

(c) treating ships which would, but for the regulations, be relevant ships for the purposes of paragraph 22B(3) as not being relevant ships for those purposes;

(d) including in the calculation set out in paragraph 22B(3) only such proportion of the tonnage of a relevant ship as may be prescribed.

(6) Regulations under this paragraph—

(a) may make different provision for different cases or circumstances, and

(b) may contain such supplementary, incidental, consequential and transitional provisions as appear to the Treasury to be necessary or expedient.

(7) In this paragraph “prescribed” means—

(a) specified in, or

(b) determined in accordance with,

regulations under this paragraph.]

[F17 Flagging: rule on first operation of qualifying dredger or tug U.K.

Textual Amendments

F17 Sch. 22 paras. 22D-22E and cross-headings inserted (1.7.2005) by Finance Act 2005 (c. 7), Sch. 7 paras. 9, 18(1) (with Sch. 7 paras. 19-21)

22D (1) This paragraph applies if— U.K.

(a) a company begins to operate a ship which—

(i) is a qualifying dredger or a tug,

(ii) would, apart from this paragraph, be a qualifying ship, and

(iii) has not previously been operated by the company or, if the company is a member of a group, by any member of the group, and

(b) on the date on which the company so begins to operate the ship, the ship is not registered in one of the Member States' registers.

(2) The ship shall not, at any time on or after that date, be regarded as—

(a) a qualifying ship operated by the company, or

(b) if immediately before that date the company is a member of a group, a qualifying ship operated by any company that is or becomes a member of the group.

(3) But sub-paragraph (2) does not apply if the ship has become registered in one of the Member States' registers by the end of the period of three months beginning with that date.

Flagging: rule on subsequent re-flagging of qualifying dredger or tug U.K.

22E (1) This paragraph applies if— U.K.

(a) a qualifying ship operated by a company ceases to be registered in any of the Member States' registers, and

(b) the ship is a qualifying dredger or a tug.

(2) The ship shall not, at any time on or after the date on which it ceases to be so registered, be regarded as—

(a) a qualifying ship operated by the company, or

(b) if immediately before that date the company is a member of a group, a qualifying ship operated by any company that is or becomes a member of the group.]

[F18 Flagging: restrictions where ship ceases to be qualifying ship under paragraph 22E U.K.

Textual Amendments

F18 Sch. 22 para 22F and cross-heading inserted (1.7.2005) by Finance Act 2005 (c. 7), Sch. 7 paras. 10, 18(1) (with Sch. 7 paras. 19-21)

22F (1) This paragraph applies where a qualifying ship operated by a tonnage tax company ceases to be a qualifying ship by virtue of paragraph 22E. U.K.

(2) No notice may be given under section 130 of the Capital Allowances Act 2001 for the postponement of all or part of a relevant allowance to which—

(a) the company, or

(b) if immediately before the date on which the ship so ceases to be a qualifying ship (“the cessation date”) the company is a member of a tonnage tax group, any company that is or becomes a member of the group,

becomes entitled on or after the cessation date.

(3) In sub-paragraph (2) “relevant allowance” means an allowance in respect of—

(a) qualifying expenditure on the provision of the ship, or

(b) qualifying expenditure which—

(i) is incurred on the provision of the ship, and

(ii) is allocated to a single ship pool.

(4) No claim may be made under section 135 of that Act for deferment of all or part of a balancing charge—

(a) to which the company or, if immediately before the cessation date the company is a member of a tonnage tax group, any company that is or becomes a member of the group becomes liable, and

(b) which arises when there is a disposal event in respect of the ship on or after the cessation date.

(5) Relief in respect of a relevant loss shall not be given under [F19 section 37 of the Corporation Tax Act 2010 (losses: deduction from total] profits of the same, or an earlier, accounting period).

(6) Group relief under [F20 Part 5] of that Act shall not be available in respect of a relevant loss.

(7) Accordingly, relief in respect of a relevant loss shall be given only under [F21 section 45 of that Act (carry forward of trade loss)].

(8) In sub-paragraphs (5) to (7) “relevant loss” means a loss which is incurred in respect of the ship on or after the cessation date in the course of a trade carried on by—

(a) the company, or

(b) if immediately before the cessation date the company is a member of a tonnage tax group, any company that is or becomes a member of the group.]

Textual Amendments

F19 Words in Sch. 22 para. 22F(5) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 316(2)(a) (with Sch. 2)

F20 Words in Sch. 22 para. 22F(6) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 316(2)(b) (with Sch. 2)

F21 Words in Sch. 22 para. 22F(7) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 316(2)(c) (with Sch. 2)