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HMRC internal manual

Tonnage Tax Manual

From
HM Revenue & Customs
Updated
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Relevant shipping profits: Non qualifying secondary activities

Activities that are not listed in the regulations and which are not core qualifying activities will be outside the tonnage tax ring-fence. It is not possible to provide an exhaustive list, but some examples are given below:

i) The operation of a port or harbour. In small ports where the port and a qualifying wharf/terminal are effectively one and the same, the non-qualifying element should be determined on a just and reasonable basis.

ii) The processing of goods and materials whether on-board, on the quayside or elsewhere, other than consolidation and breaking of cargo under the regulations. The protection and maintenance of cargo (such as refrigeration or the maintenance of any ripening fruit) will not be regarded as processing.

iii) The storage of cargo beyond what is immediately necessary whilst awaiting loading onto ships or onward transportation. For example, a warehousing or cold storage trade will not be within tonnage tax.

iv) The hire of containers to customers for use otherwise than for cargoes booked by the tonnage tax company for transit by sea.

v) Dealing or speculation in shipping futures or other shipping related financial instruments such as bunkers, not wholly entered into to hedge the company’s tonnage tax trade.

vii) Sales where orders are taken on-board for goods to be subsequently delivered to an address provided by the customer or where the goods are not of a customary type for cruise or ferry passengers to purchase.

viii) Operations that would fall to be treated as a separate trade under normal tax principles. For example, it is accepted the buying and selling ships can be, in certain limited circumstances, part of the normal operation of ships and is a core qualifying activity. However, where the buying and selling takes place to such an extent that the trade effectively becomes one of ship-dealing rather than ship operation, then it would fall outside tonnage tax. Further, any ship or ship contract that is disposed of, by any means, may not be a qualifying activity if the ship is never actually brought into use by the company for any of the activities in FA00/SCH22/PARA19 (1)(a) to (d).

References

SI00/2303/REG3 (qualifying secondary activities) TTM18003