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HMRC internal manual

Tonnage Tax Manual

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

Timing

The conditions of FA00/SCH22/PARA49 (2) (see TTM06410) should be applied afresh for each accounting period of the overseas shipping company.

A distribution from an overseas shipping company will only qualify to be included in a tonnage tax company’s relevant shipping profits if:
 

  • the conditions are satisfied for the accounting period in which the distribution becomes payable, and
  • the distribution is paid entirely out of profits that arose in an accounting period (or periods) in which the conditions were satisfied.

See TTM06440 for an illustrative example.

Conditions to be satisfied at date credited

We will accept that a qualifying dividend that is credited in the accounts of a tonnage tax company whilst the company is still in tonnage tax will fall within the tonnage tax ring fence, even if it is actually received after the company has ceased to be a tonnage tax company.

But a dividend that is credited in the accounts of a company after it has ceased to be a tonnage tax company will not fall within the tonnage tax ring-fence, even if it otherwise meets the conditions of PARA49.

Pre-tonnage tax profits

A distribution paid out of profits which arose in a period before the recipient became a tonnage tax company will not satisfy the conditions (see PARA49 (2)(e)(ii)), and will fall to be assessed outside the ring fence.

References

FA00/SCH22/PARA49 (2) (conditions) TTM17286
   
Outline of distributions from qualifying overseas shipping companies TTM06400
Conditions TTM06410
Meeting the conditions TTM06420