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HMRC internal manual

Tonnage Tax Manual

HM Revenue & Customs
, see all updates

Tax avoidance: Outline

Meaning of ‘tax advantage’

‘Tax advantage’ has the same meaning as in CTA10/S732.

Broadly speaking, this will include

  • a relief or increased relief from tax, or

  • a repayment or increased repayment of tax, or

  • the avoidance or reduction of a charge or assessment to tax, or

  • the avoidance of a possible assessment to tax,

whether the avoidance or reduction is effected by:

  • receipts accruing in such a way that the recipient does not pay or bear tax on them, or

  • a deduction in computing profits or gains.

Lessors and leases

A lease is not to be taken as being an abuse of the tonnage tax regime by reason of the lessor obtaining capital allowances as a result of the lease being, or having been, entered into.

This does not mean that a lease cannot be an abuse of the regime; it simply means that HMRC will not argue that it is an abuse merely because the lessor has obtained allowances.

Aimed at serious abuse

FA00/SCH22/PARA41 and PARA42 provide that a company or group that abuses the tonnage tax regime may be expelled.  The provision is aimed at deliberate cases of serious or repeated abuse and will not be used to attack minor errors in the computations or genuine misunderstandings.  Nor will it be used to attack any bona fide pre-election restructuring that is required to enable a group to opt for the tonnage tax regime.

Examples of abuse

Examples of situations where the provision may bite include:

  • The artificial engineering of non-qualifying income so that it falls within the tonnage tax ring-fence; for example, including within the sale price of a cruise entitlement to a significant discount on the purchase of goods or services to be provided onshore;

  • Creating a financing structure that circumvents the rules regarding the treatment of finance costs (see TTM07400);

  • Involvement in leasing arrangements designed to circumvent the restrictions on leases (see TTM10400).


FA00/SCH22/PARA41 (general anti-avoidance rule) TTM17246
FA00/SCH22/PARA42 (Tax Avoidance-Exclusion from tonnage tax) TTM17251
FA00/SCH22/PARA62 onwards (finance costs) TTM17351
FA00/SCH22/PARA89 onwards (finance leasing) TTM17486