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HMRC internal manual

Tonnage Tax Manual

The 75% limit on charters-in: If limit exceeded

Consideration of exclusion by HMRC Reason for exclusion provision

The intention behind the 75% limit is to prevent companies within tonnage tax trading with largely chartered-in tonnage, which they do not effectively operate. It follows that there is provision for an existing qualifying company or group that lapses into a high percentage of chartering-in to be excluded from the tonnage tax regime.

Flexible enforcement mirrors commercial reality

It is recognised that trading conditions may vary, and that companies or groups may at times, for genuine commercial reasons, need to supplement their tonnage with time or voyage charters. Exclusion is not therefore neither immediate nor mandatory.

Engineering an exit by exceeding 75% limit

Furthermore, a company or group could in certain circumstances try to engineer an exit from tonnage tax by deliberately exceeding the 75% limit (for instance, through a stratagem of back-to-back charters), so the power given to HMRC is permissive, and might not be used if it were thought the limit was being misused.


The power to exclude is only available if the company or group has failed the 75% test for two consecutive accounting periods (see TTM05210 for details of how this test is applied to a group). HMRC are unlikely to discover this until around the end of the third accounting period when the return for the second accounting period is normally received.

Explanation from company or group

Where a company or group indicates on its returns for two consecutive accounting periods that the 75% limit has been exceeded, HMRC should consider any explanation provided. If no explanation or comment has been provided HMRC should invite the company or representative company to say why the limit has been exceeded and what is expected to happen for subsequent accounting periods.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)


FA00/SCH22/PARA39 (exclusion of company if limit exceeded) TTM17236
FA00/SCH22/PARA40 (exclusion of group if limit exceeded) TTM17241
Action by HMRC after consideration of exceeded limit TTM05320
Exclusion procedure TTM05330
Appeals against exclusion TTM05340