Relevant shipping profits: Exclusion of investment income
Making investments is not a tonnage tax activity.
- income from investments is not relevant shipping income, and
- to the extent that an activity gives rise to ‘income from investments’ (see below) it is not regarded as part of a company’s tonnage tax activities
The only exceptions to this general rule are:
- dividends from overseas shipping companies, if certain conditions are satisfied, (see TTM06400).
- certain interest etc, which would fall to be treated as trading income under the normal corporation tax rules, (see TTM06510).
‘Income from investments’
For this purpose ‘income from investments’ includes:
- any income chargeable to tax under Schedule A or Case III of Schedule D, and
any income chargeable under Case V of Schedule D that
- consists in income of an overseas property business, or
- is equivalent to income chargeable to tax under Case III of Schedule D, but which arises from a possession outside the United Kingdom.
Intra-group loans (inter-company loans)
It follows from the above, that interest on an intra-group loan will not normally be relevant shipping income. Interest on such loans will therefore be assessable outside the ring fence.
Furthermore, if an intra-group loan is made to a tonnage tax company in circumstances such that the interest payable would fall to be allowed as a deduction in computing the relevant shipping profits of the borrower, the transfer pricing rules (as described in TTM07400) will apply. But see TTM07500on interaction of transfer pricing and finance costs.
|FA00/SCH22/PARA44 (2) (relevant shipping income)||TTM17261|
|FA00/SCH22/PARA49 (overseas shipping companies)||TTM17286|
|FA00/SCH22/PARA50 (certain interest etc.)||TTM17291|
|FA00/SCH22/PARA51 (general exclusion of investment income)||TTM17296|