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HMRC internal manual

Corporate Finance Manual

Debt Cap: the available amount: exclusions from the available amount - shipping

This guidance applies to worldwide group periods of account ending before or straddling 1 April 2017.

Income from shipping

Shipping companies can, where they are qualifying companies, elect to be taxed under an alternative regime for the purposes of corporation tax. This is the ‘tonnage tax’ regime, the provisions of which are to be found in Schedule 22 to FA 2000.

TIOPA10/S334 excludes, from the calculation of the available amount, amounts disclosed in the financial statements where the following two conditions are met:

  • Condition A - a member of the worldwide group is, for a relevant accounting period, a tonnage tax company for the purposes of Schedule 22 FA 2000.
  • Condition B - the external finance amount is taken into account in computing relevant shipping profits of that company for that accounting period, or, comprises deductible finance costs outside the ring fence to the extent that they are adjusted under Para 61 or 62 of Schedule 22 FA 2000.

So where a company or group has elected to be subject to the tonnage tax regime, any external finance amounts taken into account in computing the shipping profits are disregarded.

Where the external finance amounts outside the ring fence exceed a fair proportion of the total finance costs of the company or group (Para 61 or 62 Schedule 22 FA 2000) an adjustment is made to restrict the excess. The excess amount then becomes a non-trade loan relationship credit and is disregarded for the purposes of calculating the available amount (see TTM07400 - The Ring Fence: Finance costs).