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HMRC internal manual

Tonnage Tax Manual

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HM Revenue & Customs
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Qualifying companies and ships: Examples of bareboat charters-out

The two examples below illustrate how the ship-operation rules work

Example 1

A company owns ships A, B and C and charters-in D and E.

It bareboat charters-out B for a five year term and because of a temporary slump in bookings, it bareboat charters-out E for a one year term.

It also bareboat charters-out A for a one year term, but this was because it was offered a particularly good deal on the charter fee, rather than because it couldn’t use the ship itself.

  • It will be regarded as operating C because the company is operating the ship itself
  • It will be regarded as operating D because the company is operating the ship itself
  • It will be regarded as operating E because the ship has been chartered out on bare boat charter terms for less than three years because of short term over-capacity
  • It will not be regarded as operating A because it has not been chartered out due to over-capacity
  • It will not be regarded as operating B because it has been chartered out for more than three years.

Example 2 {.filledcircle}

Tonnage tax company X enters into a joint venture with non-tonnage tax company Y.

Together they jointly charter-in a ship.

X will be regarded as sharing in the operation of the ship and under paragraph 5 Sch 22 will only be charged to a proportion of the applicable tonnage tax profit - See TTM01310).

References {.filledcircle}

FA00/SCH22/PARA18(5) (meaning of operating a ship) TTM17096
   
   
FA00/SCH22/PARA5 (calculation in case of joint operation) TTM17021
   
Bareboat charters-out TTM03150