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HMRC internal manual

Tonnage Tax Manual

HM Revenue & Customs
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Tonnage tax elections: Effect of exceeding 75% limit on charters exceeded in first AP

Newly qualifying companies or groups that elect into tonnage tax, or companies that elect into tonnage tax during a further window of opportunity may have difficulty meeting the ‘75% test’ (see TTM05001) in the early years of trading.  There is a rule in FA00/SCH22/PARA38(2), which permits them to come into the tonnage tax regime even if they fail this test in the early years as a tonnage tax company or group.

  1. If the 75% limit is exceeded in the first accounting period in which the election would otherwise have taken effect (AP1) the election does not have effect until the next accounting period (AP2).
  2. If the 75% limit is exceeded in both AP1 and AP2, then the election does not have effect until the third accounting period (AP3).
  3. However, if the 75% limit is exceeded in AP1, AP2 and AP3, then it is treated as never having been of any effect and the company or group will not be allowed into the tonnage tax regime.

This special rule does not apply to renewal elections (see TTM02600).

The intention behind this provision is to allow those groups or companies to defer entry up to AP3 and to allow them time to come within the 75%  limit.


FA00/SCH22/PARA38(2) (election not effective if limit exceeded) TTM17231