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HMRC internal manual

Tonnage Tax Manual

Tonnage tax elections: Outline

Optional regime

Tonnage tax is an optional regime. A qualifying company or group may decide whether or not to elect into it. All companies in a tonnage tax group must come in or stay out together (FA00/SCH22/PARA 1 (2)). This is to prevent ‘cherry picking’, whereby a group could leave loss-making companies outside tonnage tax and only bring in profitable companies.

Without an election the normal Corporation Tax rules apply.

A ‘tonnage tax company’ or ‘tonnage tax group’ means, per FA00/SCH22/ PARA (1) a company or group to which a tonnage tax election has effect.

Pre-election non-statutory clearance

In order to provide shipping businesses with some certainty as to their qualification for tonnage tax, HM Revenue & Customs (HMRC) provides a clearance procedure.

This pre-election clearance procedure is available to enable any company or group interested in tonnage tax to discuss its own circumstances with HMRC in advance of making the initial election.

All non-statutory business clearance correspondence will be handled by the Tonnage Tax Technical Adviser. The guidance at TTM02010 onwards gives general information on clearances.



Elections may be made by singleton companies and by groups. Where a group election is made it must cover all qualifying companies in that group (see TTM02100).

The election will normally take effect from the start of the accounting period in which it is made, but existing shipping businesses are given some flexibility to backdate (see TTM02210), or defer (see TTM02220 & TTM02230), their entry into the regime.

Once made, an election will normally remain in force for a period of ten years (see TTM02500). But the election may be renewed before it expires (see TTM02600).

Following changes to the tonnage tax legislation in FA 2005 and FA 2008, companies were given the opportunity to withdraw from the regime.(see TTM02700).

Windows of opportunity

‘Windows of opportunity’ for making the election apply to both companies qualifying as at the dated of Royal Assent, and companies first qualifying after that date (see TTM02160)

Outside these periods a company or group that previously qualified for tonnage tax will be unable to enter tonnage tax unless the Treasury allow under FA00/SCH22/PARA 11 a further period (see TTM02180).


FA00/SCH22/PARA1(2) (all companies in group must join election) TTM17001
FA00/SCH22/PARA2(1) (tonnage tax companies and groups) TTM17006
FA00/SCH22/PARA7 onwards (tonnage tax elections) TTM17031
FA00/SCH22/PARA11 (power to provide further opportunities)) TTM17051