TTM03930 - Qualifying companies and ships: Flagging - substitute ships

FA00/SCH22/PARA22A (7) - (8)

These EU/EEA ‘flagging’ rules were repealed by FA22/S25 (6) and (7) with effect from 1 April 2022

Where the company starts to operate a vessel that is not registered on a relevant register (EU/EEA plus UK and Gibraltar), then it may not have the option of re-registering the ship, for example where a ship is time chartered in and the owner is unwilling to re-flag it.

In these circumstances the company may make an election to register a different, or ‘substitute’, qualifying ship on a relevant register.

This substitute vessel must:

  • be of at least the same tonnage as the new ship: two smaller ships that, when combined, equal the tonnage of the new ship would not be substitute ships,
  • be registered other than on a relevant register, and
  • have been first operated by that company at least three months before the date on which the vessel it is substituting was first operated.

Where the company is a member of a tonnage tax group, the substitute ship may be one operated by another member of that group.

Election

When a company first operates ship A, and decides to register a substitute vessel, ship B, it has to make an election to HMRC within 3 months of first operating ship A.

The election should be made to the HMRC office dealing with the company’s Corporation Tax affairs.

Where the company is a member of a tonnage tax group, the election must be made jointly by all the qualifying companies in that group.

For information on what is a relevant register see TTM03945.

An election should detail:

For the new vessel,

  • the name
  • the date first operated
  • the gross tonnage
  • the IMO number
  • the current flag.

For the substitute vessel,

  • the name
  • the date first operated by the company or by a company in the same group
  • the gross tonnage
  • the IMO number
  • the flag and date it was put on the register
  • the previous flag.

The legislation was amended by SI2020/332 to maintain its effect following departure from the EU/EEA, referring to relevant registers.

References

| FA00/SCH22/PARA22A (7) and (8) | TTM17126 | |——————————–|———————————————————————————-|