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HMRC internal manual

Tonnage Tax Manual

Relevant shipping profits: Qualifying Incidental Activities

This category of income will be very restricted in scope and will deal with minor items of shipping related income that do not fit comfortably into core or secondary categories. The aim will be to prevent what is otherwise a wholly qualifying shipping company from having to apply normal corporation tax rules to insignificant items of ship-related income.

A company’s ‘incidental activities’ are activities that are

  • incidental to its core qualifying activities, and
  • not qualifying secondary activities

The income from such incidental activities may come within the tonnage tax ring fence as ‘qualifying incidental activities’ if the turnover from them does not exceed 0.25% of the total turnover in the same accounting period from:

  • its core qualifying activities, and
  • its qualifying secondary activities to the extent that they do not exceed the permitted level

Incidental activities exceed 0.25%

If the turnover from incidental activities does exceed the 0.25% level, then no part of those activities will qualify, and the whole of the income from them will fall outside the ring fence.

However, if a ship-related activity, which could (in theory) fall within the definition of ‘qualifying incidental activities’ is consistently returned outside the tonnage tax ring fence, then the we do not argue that it should be treated as a qualifying incidental activity for the purposes of applying the 0.25% of turnover test to other items of incidental income.


If a company’s income from activities is:

Core £500,000
Qualifying secondary £100,000
Ship-related incidental, but consistently returned as non-shipping income outside tonnage tax £20,000
Other ship-related incidental £5,000

Then the 0.25% limit will be:


(500,000 + 100,000) x 0.25% = 15,000


The ‘other ship related income’ of £5,000 will therefore be qualifying incidental income, and will fall to be included in the company’s ‘relevant shipping profits’

(If the other incidental income had not been returned outside the tonnage tax ring fence, then the total of incidental income would have been 25,000 and all of it would have been assessed to corporation tax under the normal rules.)


FA00/SCH22/PARA48 (qualifying incidental activities) TTM17281