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HMRC internal manual

Tonnage Tax Manual

Qualifying companies and ships: Area of operation limited to sheltered waters


To qualify for tonnage tax, a ship has to be certificated as capable of navigation at sea.  This means it has to be certificated as capable of operating in waters defined as ‘sea’ under the relevant Merchant Shipping legislation.

UK waters

The waters around the coast of the UK are categorised by the Marine & Coastguard Agency, the appropriate competent authority, to distinguish between what is ‘sea’ and what is not ‘sea’.  The categories range from Category A (narrow rivers) to Category D (tidal rivers and estuaries where the wave height is not expected to exceed 2 metres). MCA category waters A to D are not ‘sea’ for tonnage tax purposes (see TTM03500 and TTM03595)

A ship that is only certified to travel in waters falling within Categories A to D is therefore  not certificated as ‘seagoing’ and is not a qualifying ship for tonnage tax purposes.  A ship will only be ‘seagoing’ if it is certificated for navigation outside these waters.  See also TTM03520 for vessels operating under restricted certificates.

Foreign waters

Other countries will normally have categorised their own waters to distinguish between what is ‘sea’ and what is not ‘sea’.  This categorisation will be influential, but not conclusive, in applying the principles above.

Further advice

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


FA00/SCH22/PARA19(4) (certificated for navigation at sea) TTM17101
Certification of ships TTM03520
Further details on certification of ships TTM15030
Seagoing TTM03510