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52U.K.An accounting period ends (if it would not otherwise do so) when a company enters or leaves tonnage tax.
53(1)The tonnage tax activities of a tonnage tax company are treated for corporation tax purposes as a separate trade (the company’s “tonnage tax trade”) distinct from all other activities carried on by the company.U.K.
(2)Sub-paragraph (1) shall not be read as requiring a company to be treated—
(a)as setting up and commencing a new trade on entry into tonnage tax, or
(b)as permanently ceasing to carry on a trade on leaving tonnage tax.
54(1)A tonnage tax company is not subject to any liability [F1at step 5 in section 371BC(1) of the Taxation (International and Other Provisions) Act 2010 (“TIOPA 2010”)] in any accounting period in respect of profits of a [F2CFC] if in that period distributions of the [F2CFC] made to the tonnage tax company would be relevant shipping income of the latter (see paragraph 49)[F3; and, accordingly, the tonnage tax company is not to be a chargeable company for the purposes of Part 9A of TIOPA 2010 in relation to the CFC's accounting period in question.] U.K.
[F4(2)In relation to a CFC which—
(a)is a member of a tonnage tax group, and
(b)is a tonnage tax company by virtue of the group's tonnage tax election, or would be if it were within the charge to corporation tax,
the corporation tax assumptions within the meaning of Part 9A of TIOPA 2010 are to be taken to include the following assumption.
(3)The CFC is to be assumed to be a single company that is a tonnage tax company.
(4)Nothing in section 371SL(1) of TIOPA 2010 affects sub-paragraphs (2) and (3) above.
(5)In this paragraph “CFC” has the same meaning as in Part 9A of TIOPA 2010.]
Textual Amendments
F1Words in Sch. 22 para. 54(1) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 20 para. 19(2)(a) (with Sch. 20 para. 50(9))
F2Word in Sch. 22 para. 54(1) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 20 para. 19(2)(b) (with Sch. 20 para. 50(9))
F3Words in Sch. 22 para. 54(1) inserted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 20 para. 19(2)(c) (with Sch. 20 para. 50(9))
F4Sch. 22 para. 54(2)-(5) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 20 para. 19(3) (with Sch. 20 para. 50(9))
55U.K.No relief, deduction or set-off of any description is allowed against the amount of a company’s tonnage tax profits.
56(1)When a company enters tonnage tax, any losses that have accrued to it before entry and are attributable—U.K.
(a)to activities that under tonnage tax become part of the company’s tonnage tax trade, or
(b)to a source of income that under tonnage tax becomes relevant shipping income,
are not available for loss relief in any accounting period beginning on or after the company’s entry into tonnage tax.
(2)Any apportionment necessary to determine the losses so attributable shall be made on a just and reasonable basis.
(3)In sub-paragraph (1) “loss relief” includes any means by which a loss might be used to reduce the amount in respect of which that company, or any other company, is chargeable to tax.
57(1)Any relief or set-off against a company’s tax liability for an accounting period does not apply in relation to—U.K.
(a)so much of that tax liability as is attributable to the company’s tonnage tax profits, or
(b)so much of that tax liability as is attributable to tonnage profits of a [F5CFC apportioned to the company at step 3 in section 371BC(1) of the Taxation (International and Other Provisions) Act 2010.]
(2)Relief to which this paragraph applies includes, but is not limited to, any relief or set-off under—
[F6(a)sections 2 and 6 of the Taxation (International and Other Provisions) Act 2010 (double taxation relief by agreement with territories outside the United Kingdom),
(aa)section 18(1)(b) and (2) of that Act (unilateral relief from double taxation), or]
(b)regulations under section 32 of the M1Finance Act 1998 (unrelieved surplus advance corporation tax).
(3)Sub-paragraph (1)(b) applies whether or not the company to which the profits are apportioned is subject to tonnage tax.
[F7(4)For the purposes of sub-paragraph (1)(b)—
(a)“tonnage profits” means so much of the CFC's chargeable profits for its accounting period in question as, applying the corporation tax assumptions, are calculated in accordance with paragraph 4 of this Schedule; and
(b)so much of those chargeable profits as are tonnage profits shall be treated as apportioned at step 3 in section 371BC(1) of the Taxation (International and Other Provisions) Act 2010 in the same proportions as those profits (taken generally) are apportioned.
(4A)In sub-paragraphs (1)(b) and (4) terms defined in Part 9A of the Taxation (International and Other Provisions) Act 2010 have the same meaning as in that Part.]
(5)For the purposes of any such regulations as are mentioned in sub-paragraph (2)(b), a company’s tonnage tax profits shall be left out of account in determining the company’s profits charged to corporation tax.
This does not affect the computation under those regulations of shadow ACT on distributions made by a tonnage tax company, whether paid out of tonnage tax profits or other profits.
(6)This paragraph does not affect—
[F8(a)any reduction under [F9Part 3A or Chapter 3A of Part 8 of the Corporation Tax Act 2010 (marginal relief for companies with small profits)], or]
(b)any set off under [F10section 967 or 968 of the Corporation Tax Act 2010] (set off for income tax borne by deduction).
Textual Amendments
F5Words in Sch. 22 para. 57(1)(b) substituted (17.7.2012) by Finance Act 2012 (c. 14), Sch. 20 para. 20(2) (with Sch. 20 para. 50(9))
F6Sch. 22 para. 57(2)(a)(aa) substituted for Sch. 22 para. 57(2)(a) (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 56 (with Sch. 9 paras. 1-9, 22)
F7Sch. 22 para. 57(4)(4A) substituted for Sch. 22 para. 57(4) (17.7.2012) by Finance Act 2012 (c. 14), Sch. 20 para. 20(3) (with Sch. 20 para. 50(9))
F8Sch. 22 para. 57(6)(a) substituted (with effect in accordance with Sch. 1 para. 22 of the amending Act) by Finance Act 2014 (c. 26), Sch. 1 para. 7
F9Words in Sch. 22 para. 57(6)(a) substituted (with effect in accordance with Sch. 1 para. 34 of the amending Act) by Finance Act 2021 (c. 26), Sch. 1 para. 14
F10Words in Sch. 22 para. 57(6)(b) 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(3)(b) (with Sch. 2)
Marginal Citations
58(1)In relation to provision made or imposed as between a tonnage tax company and another person by a transaction or series of transactions that—U.K.
(a)falls in relation to the tonnage tax company to be regarded as made or imposed in the course of, or with respect to, its tonnage tax trade, and
(b)does not fall in relation to the other person to be regarded as made or imposed in the course of, or with respect to, a tonnage tax trade carried on by that person,
[F11Part 4 of the Taxation (International and Other Provisions) Act 2010 (transactions not at arm's length) has effect with the omission of sections 174 to 184, 187 to 189 and 191 to 196 (elimination of double counting etc).]
(2)Expressions used in [F12Part 4 of the Taxation (International and Other Provisions) Act 2010] have the same meaning in this paragraph.
(3)Nothing in this paragraph affects the computation of a company’s tonnage tax profits.
Textual Amendments
F11Words in Sch. 22 para. 58(1) substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 119(2) (with Sch. 9 paras. 1-9, 22)
F12Words in Sch. 22 para. 58(2) substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 119(3) (with Sch. 9 paras. 1-9, 22)
59(1)[F13Part 4 of the Taxation (International and Other Provisions) Act 2010] (transactions not at arm’s length) applies to provision made or imposed as between a company’s tonnage tax trade and other activities carried on by it as if—U.K.
(a)that trade and those activities were carried on by two different persons,
(b)the provision were made or imposed between those persons by means of a transaction, and
(c)the two persons were both controlled by the same person at the time of the making or imposition of the provision.
[F14(2)As applied by sub-paragraph (1), Part 4 of the Taxation (International and Other Provisions) Act 2010 has effect with the omission of sections 174 to 184, 187 to 189 and 191 to 196 (elimination of double counting etc).]
(3)Expressions used in [F15Part 4 of the Taxation (International and Other Provisions) Act 2010] have the same meaning in this paragraph.
(4)Nothing in this paragraph affects the computation of a company’s tonnage tax profits.
Textual Amendments
F13Words in Sch. 22 para. 59(1) substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 119(4) (with Sch. 9 paras. 1-9, 22)
F14Sch. 22 para. 59(2) substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 119(5) (with Sch. 9 paras. 1-9, 22)
F15Words in Sch. 22 para. 59(3) substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 119(6) (with Sch. 9 paras. 1-9, 22)
60(1)Not more than 90 days after—U.K.
(a)the making of an election under this Schedule, or the occurrence of any other event, as a result of which a company enters, or is taken to have entered, tonnage tax, or
(b)the making of an election under this Schedule as a result of which a company will become a tonnage tax company at a later date,
the company shall give notice under this paragraph to any person whose tax liability may be affected by paragraph 58 (transactions not at arm’s length).
(2)The notice must state—
(a)that the company has become a tonnage tax company, or
(b)that an election has been made under this Schedule as a result of which the company will become a tonnage tax company,
and inform the person to whom it is given of the possible application of the provisions of [F16Part 4 of the Taxation (International and Other Provisions) Act 2010] in relation to transactions between the company and that person.
Textual Amendments
F16Words in Sch. 22 para. 60(2) substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 119(7) (with Sch. 9 paras. 1-9, 22)
61(1)This paragraph applies to a tonnage tax company which is a single company carrying on tonnage tax activities and other activities.U.K.
(2)An adjustment shall be made if it appears, in relation to an accounting period of the company, that the company’s deductible finance costs outside the ring fence exceed a fair proportion of the company’s total finance costs.
(3)The company’s “deductible finance costs outside the ring fence” means the total of the amounts that may be brought into account in respect of finance costs in calculating for the purposes of corporation tax the company’s profits other than relevant shipping profits.
(4)A company’s “total finance costs” means so much of the company’s finance costs as could, if there were no tonnage tax election, be brought into account in calculating the company’s profits for the purposes of corporation tax.
(5)What proportion of the company’s total finance costs should be deductible outside the ring fence shall be determined on a just and reasonable basis by reference to the extent to which the funding in relation to which the costs are incurred is applied in such a way that any profits arising, directly or indirectly, would be relevant shipping profits.
(6)Where an adjustment falls to be made under this paragraph, an amount equal to the excess referred to in sub-paragraph (2) shall be brought into account as if it were a non-trading credit falling for the purposes of [F17Part 5 of the Corporation Tax Act 2009] (loan relationships) to be brought into account in respect of a loan relationship of the company in respect of non-tonnage tax activities.
Textual Amendments
F17Words in Sch. 22 para. 61(6) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 470(4) (with Sch. 2 Pts. 1, 2)
62(1)This paragraph applies to a tonnage tax company which is a member of a tonnage tax group where the activities carried on by the members of the group include activities other than tonnage tax activities.U.K.
(2)An adjustment shall be made if it appears, in relation to an accounting period of the company, that the group’s deductible finance costs outside the ring fence exceed a fair proportion of the total finance costs of the group.
(3)A group’s “deductible finance costs outside the ring fence” means so much of the group’s finance costs as may be brought into account in calculating for the purposes of corporation tax—
(a)in the case of a group member that is a tonnage tax company, the company’s profits other than relevant shipping profits, and
(b)in the case of a group member that is not a tonnage tax company, the company’s profits.
(4)A group’s “total finance costs” means so much of the group’s finance costs as could, if there were no tonnage tax election, be brought into account in calculating for the purposes of corporation tax the profits of any member of the group.
(5)What proportion of the group’s total finance costs should be deductible outside the ring fence shall be determined on a just and reasonable basis by reference to the extent to which the funding in relation to which the costs are incurred is applied in such a way that any profits arising, directly or indirectly, would be relevant shipping profits.
(6)Where an adjustment falls to be made under this paragraph, an amount equal to the relevant proportion of the excess referred to in sub-paragraph (2) shall be brought into account as if it were a non-trading credit falling for the purposes of [F18Part 5 of the Corporation Tax Act 2009] (loan relationships) to be brought into account in respect of a loan relationship of the company in respect of non-tonnage tax activities.
For this purpose “the relevant proportion" is the proportion that the company’s tonnage tax profits bear to the tonnage tax profits of all the members of the group.
Textual Amendments
F18Words in Sch. 22 para. 62(6) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 470(5) (with Sch. 2 Pts. 1, 2)
63(1)For the purposes of paragraphs 61 and 62 “finance costs” means the costs of debt finance.U.K.
(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 [F19Part 5 of the Corporation Tax Act 2009] (loan relationships);
[F20(b)any credit or debit falling to be brought into account [F21in 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 [F22section 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;
[F23(dd)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 [F24section 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.
[F25(4)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).]
Textual Amendments
F19Words in Sch. 22 para. 63(2)(a) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 470(6)(a) (with Sch. 2 Pts. 1, 2)
F20Sch. 22 para. 63(2)(b) substituted (24.7.2002 with effect as mentioned in s. 83(3)(4) of the amending Act) by 2002 c. 23, s. 83, Sch. 27 para. 23(3)
F21Words in Sch. 22 para. 63(2)(b) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 470(6)(b) (with Sch. 2 Pts. 1, 2)
F22Words in Sch. 22 para. 63(2)(c) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 470(6)(c) (with Sch. 2 Pts. 1, 2)
F23Sch. 22 para. 63(2)(dd) substituted (with effect in accordance with Sch. 9 para. 9(4) to the amending Act) by Finance Act 2006 (c. 25), Sch. 9 para. 9(2)
F24Words in Sch. 22 para. 63(2)(dd) 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(4) (with Sch. 2)
F25Sch. 22 para. 63(4) inserted (with effect in accordance with Sch. 9 para. 9(4) to the amending Act) by Finance Act 2006 (c. 25), Sch. 9 para. 9(3)