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HMRC internal manual

Tonnage Tax Manual

HM Revenue & Customs
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The ring fence: Transfer pricing: Outline

Transfer pricing rules are aimed at preventing connected parties manipulating prices so as to maximise income within the tonnage tax ring fence and minimising the taxable profits outside the ring fence.

(As the taxable profits within the ring fence are fixed by reference to the tonnage of the ships operated, any reduction in the taxable profits outside the ring fence would not be matched by an increase in the taxable profits within the ring fence.)

Tonnage tax ring fence

The transfer pricing provisions in TIOPA10/PART4 are therefore extended to cover transactions across the tonnage tax ring fence between persons within the charge to UK tax (and between divisions within a company).  These provisions are applied as if the party inside the tonnage tax ring fence was not within the charge to UK tax.

Transactions between a partnership and its members may be caught if the partnership includes both a tonnage tax partner and a non-tonnage tax partner, see TTM13300.


The transfer pricing rules apply to transactions (i.e. provisions made or imposed) which are not at arms length (as defined in TIOPA10/PART4).  This means that transactions with companies outside the tonnage tax group may be caught.  See example below.


Company A (a pure tonnage tax company) and Company B (a non-tonnage tax company belong to tonnage tax group G.

Company C is a joint venture tonnage tax company, owned 50 per cent by Group G (but not controlled by Group G), and 50 per cent by Group H (a non-resident group).

Transactions between Company B and Company C may be caught by the transfer pricing rules, even though B and C are not in the same tonnage tax group.


FA00/SCH22/PARA58 (transactions between companies) TTM17331
FA00/SCH22/PARA59 (transactions between divisions) TTM17336
Interaction between transfer pricing and finance costs TTM07500