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HMRC internal manual

Tonnage Tax Manual

The 75% limit on charters-in: How to calculate

Deferment of group entry if test failed

A group begins to operate qualifying ships on 1 July 2005, and immediately makes an election to come into tonnage tax. The group consists of two companies:
 

  • company A has an accounting date of 31 December, and
  • company B has an accounting date of 30 September.

The election would normally take effect from 1 July 2005, but it will not have effect in the accounting period beginning on 1 July 2005 if the 75% test is not satisfied in that period (see TTM02410).
 

The test applies to the period 1 July 2005 to 30 September 2005 (the first accounting period of company B). If the limit is exceeded by the group in this period, then the election cannot take effect before 1 October 2005.

But the test also applies to the period 1 July 2005 to 31 December 2005 (the first accounting period of company A). If the limit is exceeded by the group in this period, then the election cannot take effect before 1 January 2006.

References

FA00/SCH22/PARA38(3)(b) (elections after the initial period) TTM17231
   
Accounting periods of group companies TTM05210
Example 2: Possible exclusion for exceeding limit over 2-year period TTM05230