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HMRC internal manual

Tonnage Tax Manual

HM Revenue & Customs
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Ship leasing: Outline: Which leases are affected?

Subject to the grandfathering provisions mentioned below, with effect from 19 December 2002 the special provisions in FA00/SCH22/PART10 apply to any lease:

  • of a qualifying ship (see TTM03500),
  • which is provided directly or indirectly to a company within Tonnage Tax (or to a partnership which includes a tonnage tax company, see TTM13310), and
  • which was entered into after 23 December 1999 (see ‘grandfathering provisions’ below)

For example, if a lessor provides a ship to a non-tonnage tax company, which in turn charters it to a tonnage tax company (after 23 December 1999), the provisions of PART10 will apply, because the lessor is indirectly providing a qualifying ship to a tonnage tax company.

Grandfathering provisions

Leases may well have been entered into prior to the introduction of the tonnage tax regime, in the expectation that capital allowances would be due in the normal way. Leases entered into before the draft legislation was published have therefore been grandfathered.

This means that the special provisions in PART10 do not apply to any finance lease entered into on or before 23 December 1999.

Novation of lease

Where a lease is novated to a fellow group company HMRC will normally accept that it remains the same lease for the purposes of the ‘grandfathering’ provisions.  For further information see [CA28000](


FA00/SCH22/PARA89(1) (scope of ship leasing) TTM17486
SI00/2303/REG9(4) (lease to a partnership) TTM18009
FA00/SCH22/PARA102 (grandfathering) TTM17586