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HMRC internal manual

Tonnage Tax Manual

Introduction to tonnage tax: Tonnage tax profits:

Method of calculation

Gross and net tonnage

Gross tonnage is used when deciding whether a ship is qualifying, for which it must be 100 gross tons or more, (see TTM03500).

Net tonnage is used in the actual calculation of tonnage tax profit, (see TTM01330).

Further description of the tonnage of ships and its various forms is set out in TTM15020.

Method of calculation

The legislation provides for a calculation of the tonnage tax profits in four steps, although in practice the stages may be combined.

Step One – the daily profit

Determine the daily profit for each qualifying ship by reference to the following table:
 

For each 100 tons up to 1,000 tons £0.60
   
For each 100 tons between 1,000 and 10,000 tons £0.45
For each 100 tons between 10,000 and 25,000 tons £0.30
For each 100 tons above 25,000 tons £0.15

For example, the daily profit of a ship with a net tonnage of 17,371 tons would be £68.40, made up of:

  10 x £0.60 = £ 6.00
       
plus 90 x £0.45 = £40.50
plus 73 x £0.30 = £21.90

 

Step Two – ship’s profit for accounting period

Multiply the daily profit by the number of days in the accounting period,

or, if operated for only part of the period, by the number of days in that part.

 

For example, if the ship mentioned above were operated for the whole of the accounting period ended 31 December 2003, the ship’s profit for that accounting period would be £24,966 (£68.40 x 365).

Step Three – repeat for each ship

Follow Steps One and Two for each ship operated.

Step Four – company’s profit for accounting period

Add together the results for each ship to calculate the company’s tonnage tax profit for the accounting period.

Leap years

Because tonnage tax is a daily profit, the ships profit in a leap year will be slightly higher than in a non-leap year (366 x the daily profit, rather than 365 x the daily profit).

Joint and multiple interests in same ship

For joint interest in ship at same level see TTM01310.

For multiple interests in same ship at different levels see TTM01320.

Example

See the example at TTM01340 for an illustration of how a tonnage tax computation might be set out in practice.

Tonnage tax calculator

A simple way of computing the tonnage tax profit for one or more ships can be accessed at Tax Calculator.

References

FA00/SCH22/PARA4 (method of calculation) TTM17016
   

 

FA00/SCH22/PARA19 (Qualifying ships) TTM03590