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HMRC internal manual

Tonnage Tax Manual

Relevant shipping profits: Non-qualifying activities

Tonnage tax is intended to be tightly ring-fenced. To qualify, a ship must satisfy particular conditions and carry out certain activities (see TTM03500). See also, TTM03600, which sets out various land-based activities that can prevent a ship from being a qualifying ship.

So, even if a company operates nothing but qualifying ships, there are certain types of activity that may not come within the regime. These are broadly



  • any activities that are not ship related (for example, running a conference and exhibition centre), and
  • activities which, although related to shipping, are primarily land-based activities.
  • However, it is possible that some ship-related activities, which are neither core nor secondary, may qualify as incidental, (see TTM06200).




At a more than incidental level, most activities, which may be in competition with companies ineligible for tonnage tax, are excluded from the regime.

Specific examples of such ineligible shipping-related activities are:

  • Ship-building.
  • The sale of ships as part of a ship dealing trade.
  • Onward transport of cargo, otherwise than on the ship operator’s ships.
  • Sale on board ship of goods or services not customarily provided to passengers, for example, sale of cars, domestic appliances or livestock.
  • The operation of a port or harbour. (In small ports which may have only one terminal the non-qualifying element should be determined on a just and reasonable basis).
  • 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.
  • 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.
  • The hire of containers to customers for use otherwise than for cargoes booked by the tonnage tax company for transit by sea.
  • 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.
  • A ship based holiday where the ship remains moored and there is no sea transportation element.
  • 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.
  • Operations that would fall to be treated as a separate trade under normal tax principles. For example, it is accepted that buying and selling ships is 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.


Core qualifying activities TTM06050
Qualifying secondary activities TTM06100
Qualifying incidental activities TTM06200