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HMRC internal manual

Tonnage Tax Manual

The ring fence: Outline

As described at TTM06001 onwards, relevant shipping profits are replaced by tonnage tax profits in a tonnage tax company’s corporation tax computation.

The tonnage tax regime is very tightly ring fenced to ensure that


  • only income and expenses that properly belong to the ship operation trade are included within relevant shipping profits, and
  • all other income and expenses are taxed under the normal corporation tax rules.

The general ring fence provisions described in this chapter cover a range of issues:

  • In order to facilitate the separation of relevant shipping profits from other profits a company will begin a new accounting period when it enters or leaves Tonnage Tax (see TTM07010), and a company’s tonnage tax activities are deemed to be a separate trade distinct from its other activities (see TTM07020).
  • CFCs may be carrying on shipping trades which would be qualifying trades if the CFC were resident in the UK. There are special rules to deal with the treatment of dividends received by, or amounts apportioned to, UK companies (see TTM07100)
  • Tonnage tax is designed to produce a minimum level of tax, and there are special rules to prevent deductions being made from tonnage tax profits, or against the tax on those profits (see TTM07200)
  • The general transfer pricing rules are extended to cover transactions across the tonnage tax ring fence (see TTM07300)
  • There are special rules to prevent a company or group charging a disproportionate amount of its finance costs outside the ring fence (se TTM07400)

Other aspects of the ring fence, dealt with elsewhere in this manual, are

  • The Ring Fence: Capital allowances: General (see TTM09001onwards)
  • The Ring Fence: Capital allowances: Ship leasing (see TTM10001onwards



FA00/SCH22/PARA52 onwards (the ring fence: general provisions) TTM17301