Part XIVU.K. Withdrawal of relief etc. on company leaving tonnage tax
IntroductionU.K.
137(1)This Part of this Schedule applies where a company ceases to be a tonnage tax company.U.K.
(2)The provisions of paragraphs 138 and 139 (exit charges: chargeable gains and balancing charges) apply where a company ceases to be a tonnage tax company—
(a)on ceasing to be a qualifying company for reasons relating wholly or mainly to tax, or
(b)under paragraph 42 (exclusion from tonnage tax where tax avoidance arrangements entered into).
(3)Paragraph 140 (ten year disqualification from re-entry into tonnage tax) applies in every case where a company ceases to be a tonnage tax company otherwise than on the expiry of a tonnage tax election.
Exit charge: chargeable gainsU.K.
138(1)Paragraph 65(1)(a) (chargeable gain: disposal of tonnage tax assets) has effect in relation to gains (but not losses) on all relevant disposals as if the company had never been a tonnage tax company.U.K.
(2)For this purpose a “relevant disposal” means a disposal—
(a)on or after the day on which the company ceases to be a tonnage tax company, or
(b)at any time during the period of six years immediately preceding that day when the company was a tonnage tax company.
(3)Where sub-paragraph (1) operates to increase the amount of the chargeable gain on a disposal made at a time within the period mentioned in sub-paragraph (2)(b), the gain is treated to the extent of the increase—
(a)as arising immediately before the company ceased to be a tonnage tax company, and
(b)as not being relevant shipping profits of the company.
(4)No relief, deduction or set-off of any description is allowed against the amount of that increase or the corporation tax on that amount.
Exit charge: balancing chargesU.K.
139(1)This paragraph applies if in a relevant accounting period during which the company was a tonnage tax company it was liable to a balancing charge in relation to which paragraph 78 (phasing-out of balancing charges) applied to reduce the amount of the charge.U.K.
(2)For this purpose a “relevant accounting period” means an accounting period ending not more than six years before the day on which the company ceased to be a tonnage tax company.
(3)The company is treated as having received an additional amount of profits chargeable to corporation tax equal to the aggregate of the amounts by which those balancing charges were reduced.
(4)Those additional profits are treated—
(a)as arising immediately before the company ceased to be a tonnage tax company, and
(b)as not being relevant shipping profits of the company.
(5)No relief, deduction or set-off of any description is allowed against those profits or against corporation tax on them.
Ten year disqualification from re-entry into tonnage taxU.K.
140(1)A company election made by a former tonnage tax company is ineffective if made before the end of the period of ten years beginning with the date on which the company ceased to be a tonnage tax company.U.K.
(2)A group election that—
(a)is made in respect of a group whose members include a former tonnage tax company, and
(b)would result in that company becoming a tonnage tax company,
is ineffective if made before the end of the period of ten years beginning with the date on which that company ceased to be a tonnage tax company.
(3)Sub-paragraphs (1) and (2) do not prevent a company becoming a tonnage tax company under and in accordance with the rules in Part XII of this Schedule (groups, mergers and related matters).
(4)In this paragraph “former tonnage tax company” means a company that is not a tonnage tax company but has previously been a tonnage tax company.
Second or subsequent application of this PartU.K.
141U.K.Where this Part of this Schedule applies on a second or subsequent occasion on which a company ceases to be a tonnage tax company (whether or not this Part applied on any of the previous occasions)—
(a)the references to the company ceasing to be a tonnage tax company shall be read as references to the last occasion on which it did so, and
(b)the references to the period during which the company was a tonnage tax company do not include any period before its most recent entry into tonnage tax.