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HMRC internal manual

Tonnage Tax Manual

Qualifying companies and ships: Dredgers


There is no statutory definition of a ‘dredger’, which therefore has its ordinary English meaning.  A dredger is a vessel specifically constructed or converted for lifting material from the seabed.  This may be by means of hoppers, suction or other mechanical devices.

The use of dredgers falls into two broad types: for maintenance of navigation by dredging channels, and for dredging up sand and aggregate from the seabed for use by the construction industry and in land reclamation.

For periods up to 30 June 2005, all dredgers were excluded from tonnage tax.

Qualifying dredgers

From 1 July 2005, some dredgers qualify for tonnage tax (FA00/SCH22/PARA20A).

To qualify for tonnage tax a dredger has to:

  • be self propelled
  • be constructed, or adapted for the carriage of cargo
  • be registered on a register of a Member State
  • spend at least 50 per cent of its operational time carrying goods at sea.

The type of dredger that may qualify for tonnage tax is an aggregate dredger, which dredges sand or gravel from the sea-bed and carries it to port for resale or use in the construction industry; this is the carriage of cargo. Dredgers that maintain navigable waterways, or are used in preparatory work for construction, where the dredged material is then dumped in a different location, are not qualifying dredgers.

Operational time will include travelling to the dredge site, winning the dredged material and transport back to unload.  The dredge site must be at sea (see TTM03610).

Non-qualifying dredger

All non qualifying dredgers are excluded vessels.  Profits from operating these vessels are taxed under the normal rules of Corporation Tax.

Flagging (FA00/Sch22/para22D)

A dredger will only be a qualifying ship if it is registered on the register of a Member State.

When a company in tonnage tax starts to operate a dredger that is not registered in a Member State, they have three months from the date when they start to operate the vessel in which to re-flag the vessel to the register of a Member State.

If it is not registered within that period, then it is treated as not qualifying from the date of first operation.  Even if the dredger is subsequently registered in a Member State, it will not become a qualifying ship whilst operated by that company or a company that is a member of the same group.

Ceasing to be flagged in an EU Member State (FA00/SCH22/PARA22E & FA00/SCH22/PARA22F)

If a dredger ceases to be registered on the register of a Member State, then it ceases to be a qualifying ship from that date.

In addition the dredger will never again be a qualifying ship if it is operated by:

  • that company, or
  • if the company is a member of a group, any other company that is a member of that group or which becomes a member of that group.

In these circumstances:

  • capital allowances in respect of qualifying expenditure on the ship cannot be postponed under CAA01/S130 (see CA25200)
  • on the disposal of the ship the balancing charge, or any part of it, cannot be deferred under CAA01/S135 (see CA25300)
  • relief cannot relief cannot be claimed in respect of a ‘relevant loss’.

A ‘relevant loss’ is a loss incurred in respect of the ship after it ceased to qualify for tonnage yax.


FA00/SCH22/PARA20 (1)(f) (dredgers) TTM17106
FA00/SCH22/PARA20A (Qualifying dredgers and tugs) TTM17111
FA00/SCH22/PARA22D, PARA20E and PARA20F TTM17141
Excluded vessels TTM03620
Need to consider end-user of chartered ship TTM03675