This part of GOV.UK is being rebuilt – find out what beta means

HMRC internal manual

Tonnage Tax Manual

Ship Leasing: Defeased leasing

Excepted forms of security: Security inherent in the ship

Any security which is inherent in the leased ship itself is an ‘excepted form of security’, and may be disregarded when determining the extent to which a lease has been defeased (see TTM10110)

This will include any form of security relating to assets, sums or rights arising directly from the ordinary operation of the ship or from arm’s length transactions involving the ship. In particular it will include:

  • a mortgage of the ship,
  • an assignment of the ship’s earnings,
  • an assignment of the right to the proceeds of any insurance policies on the ship, and
  • an assignment of the right to receive any rental rebates arising from the arm’s length sale of the ship.

Where more than one ship is leased as part of the same deal, HMRC accepts that the cross-collateralisation of all the ships leased under that deal will fall to be treated as an ‘excepted form of security’.

A guarantee provided by a third party may be an ‘excepted form of security’ if the only security provided to that third party is security, which is inherent in the ship (see TTM10120).


FA00/SCH22/PARA91 (excepted forms of security) TTM17501