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HMRC internal manual

Tonnage Tax Manual

HM Revenue & Customs
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The ring fence: Controlled foreign companies: Outline

FA00/SCH22/PARA146 provides that ‘controlled foreign company’ has the same meaning for tonnage tax as in Chapter IV of Part XVII of the Taxes Act 1988 (tax avoidance: controlled foreign companies).  CFCs are now dealt with at Part 9A of TIOPA 2010 – see Schedule 20 FA 2012.

Where a UK tonnage tax company has as an overseas subsidiary which is a controlled foreign company (CFC), there are three possible ways of dealing with the profits of the CFC:

  1. CFC is an overseas shipping company within paragraph 49

There will be no liability under the CFC legislation if any distributions from the overseas subsidiary (whether or not actually paid) would have been ‘relevant shipping profits, (see TTM07110).

  1. CFC operates qualifying ships, but paragraph 49 does not apply

There may be liability to tax under the CFC legislation if any distributions from an overseas shipping company (whether or not paid) would not have been ‘relevant shipping profits’ (see TTM06400). But if the overseas subsidiary would have been a tonnage tax company if it were within the charge to corporation tax, then the profits for CFC purposes are calculated as if it were a singleton UK tonnage tax company, (see TTM07120).

  1. CFC is not an overseas shipping company

If the overseas subsidiary would not be a tonnage tax company if it were within the charge to corporation tax (and in particular if it does not operate qualifying ships) then the normal CFC rules apply.

Reliefs and deductions

The exclusion of reliefs or set-offs against tax also applies to the tax attributable to any ‘tonnage tax profits’ of a CFC which are included in the amounts apportioned to a company under step 3 in TIOPA10/S371BC (1), see TTM07230.


FA00/SCH22/PARA49 (overseas shipping companies) TTM17286
FA00/SCH22/PARA54 (profits of controlled foreign companies) TTM17311
FA00/SCH22/PARA146 (meaning of ‘controlled foreign company’) TTM17806