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HMRC internal manual

Tonnage Tax Manual

The 75% limit on charters-in: Chartered-in

Charters not taken into account

Bareboat charters

A charter on ‘bareboat charter terms’ is defined (FA00/SCH22/PARA143) as meaning:

‘a hiring of a ship for a stipulated period on terms which give the charterer possession and control of the ship, including the right to appoint her master and crew’.

Another name for such a charter is ‘charter by demise’. A lease of a ship to an operator is another form of charter by demise, i.e. it is a bareboat charter.

In practice, the term ‘bareboat charter’ is widely used and well understood in the shipping industry, and it is unlikely that the definition will cause problems in practice.

See TTM15110 for further background information

Non-qualifying ship disregarded

A qualifying company may operate non-qualifying ships.  These might include:

  • A vessel on a long-term bareboat charter-out.
  • A vessel specifically excluded from tonnage tax, e.g. a fishing vessel.

These ships should not be taken into account in arriving at the percentage.  If a vessel were operated normally for six months and then bareboat chartered-out (outside the tonnage tax regime) for the remaining six months, it should only be taken into account for the first six months of qualifying use.

Intra-group charters

Any vessel operated by more than one qualifying company in a tonnage tax group for the same days should only be counted once.  So where a ship is owned by one company and bareboat chartered to and operated by another company in the same tonnage tax group, only the owning company’s interest should be used in the computation of the tonnage operated by the group (FA00/SCH22/PARA37(3)).

A ship that is time-chartered from another tonnage tax company in the same group is not ‘chartered-in’ by that company for the purposes of applying the 75% test.  But a ship that is time chartered-in from a non-resident member of that group will be ‘chartered-in’.  The non-resident company will not be a qualifying company, as it is not within the charge to UK Corporation Tax (see TTM03001).


FA00/SCH22/PARA143 (bareboat charter terms) TTM17791
What is chartered-in TTM05100
Charters to be taken into account TTM05120