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HMRC internal manual

Tonnage Tax Manual

HM Revenue & Customs
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Qualifying companies and ships: Strategic and commercial management - additional factors


Flagging is not a condition for a qualifying ship for years that are excepted under FA00/SCH22/PARA22B (2) (see TTM03905) but the fact that a vessel may be flagged in the UK will add weight to the indicators for commercial management.

Weighting of elements

The more elements that are carried out in the United Kingdom, the more likely it is that the company will be accepted as satisfying the test. The approach is not a mechanistic one; the weight given to each element will depend on an intelligent appraisal of the facts of each case. Greater weight will be given to higher levels of decision-making and management, as opposed to routine day-to-day management activities.

A world-wide shipping operation may delegate many of the lower level activities to local branches. In assessing the weight and relevance of the various elements of commercial management activity, factors to take account of include the

  • extent to which each element is carried out in the UK, as compared with the extent that it is carried on elsewhere
  • nature and extent of the accommodation occupied in the UK
  • number of employees engaged in these activities in the UK, and
  • country of residence of key management staff, including company directors.

International groups

For an international group, the extent to which strategic and commercial management activities in the UK correspond to the UK’s share of the world-wide fleet is a factor. If some group functions in relation to the fleet are carried out in the UK and other functions elsewhere, the group may still be seen as commercially managing its fleet from the UK, provided there is a reasonable balance of activities in the UK represented by ships within the UK’s tonnage tax regime in proportion to world-wide fleet activities.

Third party activity

Activities or management contracted out to a third party will count as a contributing factor, provided carried on in the UK.

UK waters

The test does not require the vessels to be operated in UK waters.

Fleet to be examined as a whole

FA00/SCH22/PARA16 (1)(c) provides that the qualifying ships operated by a UK tonnage tax company must be strategically and commercially managed in the UK. It does not follow that each ship operated by the company from the UK must be managed in like manner and to the same extent as every other one. But each ship must satisfy sufficient of the strategic and commercial management criteria, and the company’s fleet as a whole must be strategically and commercially managed in the UK within the criteria of the Commission guidelines and the preceding TTM paragraphs. Special factors come into play where ships are chartered in by an operator - see TTM03835.


FA00/SCH22/PARA16 TTM17086
Introduction to strategic and commercial management TTM03800
Strategic management TTM03810
Commercial management TTM03820
Chartering in TTM03835
Examples TTM03840
Flagging TTM03900