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HMRC internal manual

Tonnage Tax Manual

From
HM Revenue & Customs
Updated
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Qualifying companies and ships: Flagging - substitute ships

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

Where the company starts to operate a vessel that is not registered on the register of a Member State, then it may not have the option of re-registering the ship on the register of a Member State.

For example where a ship is time chartered in, the owner may be unwilling to re-flag the vessel.

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

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
  • registered other than on the register of a Member State
  • 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 constitutes the register of a Member State 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 member state flag and the date it was put on the register
  • the previous flag

References

FA00/SCH22/PARA22A (7) and (8) TTM17126