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HMRC internal manual

Tonnage Tax Manual

Relevant shipping profits: Vessels providing transport for services necessarily provided at sea

Under FA00/SCH22/PARA19 (1)(d), a sea going ship of 100 gross tonnes or more used for transport by sea in connection with services of a kind necessarily provided at sea, is a qualifying ship for Tonnage Tax.

Guidance on the types of activities done by vessels to which this sub-section refers can be found at TTM03570.

If a ship is engaged in a PARA19 (1)(d) activity, all the income from a time charter party for the ship will be included in the Tonnage Tax ringfence.

However, if the contract or charter for the ship includes any service that is not necessarily provided at sea (for example land based activities in TTM03610) then the income that relates the service not necessarily provided at sea will not be within Tonnage Tax. These non tonnage tax activities will include such things as onshore support or engineering work undertaken by onshore engineers. In this situation the only income which will be within Tonnage Tax is the income that relates to the transportation by sea in connection with services of a kind necessarily provided at sea ie the transport and service provided at sea.

This interpretation is a change of view that was announced in Revenue & Customs brief 42/09, published on 21 July 2009.