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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: Certification of ships

Certification of ships

The legislation requires that a ship is seagoing which means it must be certificated for navigation at sea.  A ship does not need any special form of certification to qualify for tonnage tax.  This is not a question of tax law, but of merchant shipping legislation.

The question is whether the competent authority has issued a certificate in accordance with relevant merchant shipping legislation that allows the ship to operate lawfully at sea.

Certificates issued under international conventions

Ships undertaking international voyages need to be certificated under various international conventions.  HMRC will accept that a ship is a seagoing ship if:

  • it has an ‘International Load Line Certificate’, or an ‘International Load Line Exemption Certificate’ – the latter certificate is issued to an unconventional ship which is seagoing but for which a conventional load line my be inappropriate, e.g. a hydrofoil or hovercraft, or
  • it has a certificate issued under the International Convention for the Safety of Lives at Sea (SOLAS), and has a Certificate of Compliance with the International Safety Management code, or
  • the company has a Safety Management Certificate and each vessel has  a Document of Compliance in accordance with the ISM code.

Certificates issued under domestic legislation

It is not a requirement for tonnage tax that qualifying ships are engaged in international traffic, but the position is more complicated for those that are not, as they are not necessarily covered by the international conventions.  Their qualification as seagoing ships for the purposes of tonnage tax must be determined by reference to certificates that may be issued under domestic law.  In the case of the UK this is the Merchant Shipping Acts.

Domestic certification must amount to certification for navigation at sea. In determining this it will be necessary to consider the extent to which ‘conditions’ or ‘plying limits’ imposed by the certificate restrict a ship’s scope for operating at sea.

Competent authority

In the case of the UK the competent domestic authority is the Maritime & Coastguard Agency (MCA) under the Merchant Shipping Acts.  It issues certificates to vessels not covered by international conventions.  See TTM03520 and TTM03530 for details of how MCA certification affects qualification for tonnage tax.

Further advice

In cases of doubt or difficulty seek help from the Tonnage Tax Technical Adviser.

References

Restricted certificates TTM03520
   
Sheltered waters TTM03530