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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: Tugs other than qualifying tugs

Not all tugs qualify for tonnage tax.  Port and harbour tugs do not qualify. A sea going tug must spend at least 50% of its operational time in towage or salvage at sea in order to qualify for tonnage tax.  A qualifying tug must also be registered on the register of a Member State (TTM03685)

Any waiting time spent by a tug for the purposes of a particular activity is treated as time during which the tug is used for that activity.

Examples of how this will apply to different types of tugs are:

  • a tug used to tow barges or other unpowered vessels across the sea may qualify for tonnage tax
  • an ocean going salvage tug may qualify for tonnage tax
  • a tug used to assist ships into and out of harbour does not qualify for tonnage tax
  • a tug towing barges on inland waters does not qualify for tonnage tax
  • a tug towing barges mainly in estuarine conditions (for example the Humber or Thames estuaries) will not qualify for tonnage tax.

This list is not exhaustive

Sunken cargo

Where a tug is involved in raising sunken cargo, this is regarded as diving support, and will be a qualifying ship under FA00/SCH22/PARA19 (1)(d) –see TTM03570.

Any profits from the sale of salvaged goods will fall outside the tonnage tax ring-fence.

Anchor handling tug supply vessels

Anchor handling tug supply (AHTS) vessels are a type of multi-functional support vessel for the oil industry. They differ from platform supply vessels in that they are fitted with winches. They raise and carry anchors, tow the rigs and act as supply and attendance vessels.

The rules relating to tugs are primarily aimed at excluding from tonnage tax vessels which do not in the main operate on the open sea, reflecting the status of tonnage tax as a State aid approved by the EU Commission, focused on internationally tradable services.  An AHTS should not be regarded as a tug.

References

FA00/SCH22/PARA20A (2)  Qualifying tugs and dredgers TTM03560
   
Excluded vessels TTM03620