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HMRC internal manual

Tonnage Tax Manual

HM Revenue & Customs
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Qualifying companies and ships: Flagging - condition 2

FA00/SCH22A/PARA22A (3)

The second condition to be considered is whether the proportion of the company’s total tonnage that is flagged on the register of a Member State is on average less than 60 per cent over a period beginning with the start of that financial year and ending on the day the company begins to operate the new ship.

The percentage of a company’s total tonnage which is community flagged is

CFT x 100 ÷ TT


  • CFT is the aggregate tonnage of such of the relevant ships that are registered on the register of a Member State
  • TT is the aggregate tonnage of all the relevant ships.

The relevant ships are the ships operated by the company or, where the company is a member of a tonnage tax group, the ships operated by all the qualifying companies in that group (see FA00/SCH22/PARA22B (4)).

A company is regarded as operating any ship owned by, or chartered to, the company.  All vessels, whether owned, bareboat chartered or time chartered, should be included as relevant vessels for all purposes of the calculation above.

‘On average’ means taking the period in the financial year as a whole, not looking at the position solely on the day the new vessel begins to be operated. For example:

On 1 April 2008 the total gross tonnage of ships operated by a company is 400,000 tons.  The company’s vessels in tonnage tax have gross tonnage of 300,000 tons.  (The difference is explained by ships that are not qualifying for tonnage tax).

The company has vessels registered in member states with aggregate gross tonnage of 250,000.

On 1 August 2008 the company begins to operate a new vessel of 30,000 gross tons.  The new vessel is not registered in a Member State.


### Date ### Total ### EU Flagged ### Not EU ### % EU
1.4.08 to 31.07.08 400,000 250,000 150,000 62.5
01.08.08 430,000 250,000 180,000 58.2

The relevant percentage is computed using gross ton days.

The period from 1 April 08 to 31 July 08 is 122 days.


Total tonnage is: 400,000 x 122 = 48,800,000
Total EU is: 250,000 x 122 = 30,500,000

The period in PARA22A (3) ends on 1 August 2008 when the company begins to operate the new ship.


On 1 August total tonnage is: 430,000
Total EU tonnage is:   250,000

 To compute the average add the total tonnage on 1 August to the total tonnage for the four months to 31 July, giving:


Total tonnage: (48,800,000 +430,000) TT = 49,230,000,
Total EU tonnage: (30,500,000 +250,000) CFT = 30,750,000

The average total EU registered as a percentage of total tonnage is 62.46.

In this case condition 2 is not satisfied as over 60 per cent of the tonnage is flagged in the EU. As a result vessel does not need to be EU-registered to be a qualifying ship.

For guidance on Member States’ registers see TTM03945


FA00/SCH22/PARA22A (3) TTM17126