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HMRC internal manual

Tonnage Tax Manual

HM Revenue & Customs
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Relevant shipping profits: Distributions from qualifying overseas shipping companies

Meeting the conditions

The conditions for including distributions from overseas shipping companies in relevant shipping profits are very strict. In particular, the requirement in paragraph 49(2)(d) that all the overseas company’s income is such that it would be relevant shipping income, if it were a tonnage tax company, may be difficult to meet in practice. For example the dividends would not qualify for this treatment if the overseas company had income from a secondary activity which exceeded the permitted levels.

Arranging to meet the test

However it should be noted that the test in paragraph 49(2)(d) applies to income and not to activities. We will therefore accept that the test is satisfied if effective arrangements are in place to ensure that the overseas shipping company has no income that is not relevant shipping income.

Such arrangements should ensure that all profits arising from non-qualifying activities will be taxed outside the tonnage tax ring-fence when paid up to the UK as dividends.

De minimis exclusion

We will also accept that where an overseas company receives minimal levels of non- relevant shipping income, this may be disregarded on de minimis grounds when considering the paragraph 49(2)(d) condition.

Minimal in this case means income up to the level specified in paragraph 48(2), i.e. 0.25% of turnover from core and qualifying secondary activities.


Outline of distributions from qualifying overseas shipping companies TTM06400
Conditions TTM06410
Timing TTM06430