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HMRC internal manual

Tonnage Tax Manual

Ship leasing: Defeased leasing

Valuing the ship

In measuring the ‘non-compliance risk’ it will be necessary to take into account the future realisable value of the ship.

This may be derived from a series of valuations carried out as at regular intervals over the length of the lease. For example, on a 20-25 year lease valuations should be made as at intervals of not less than 5 years.

These should be professional valuations, taking into account normal valuation principles. Factors such as:

  • the anticipated state of that sector of the shipping market,
  • the forecast of future trends, and
  • the adaptability or otherwise of the ship to other purposes and the dominance of the lessee in that particular sector

may be relevant if they are part of a normal valuation process.

The valuations of the ship should be done from the perspective of Day 1 – if the circumstances subsequently change, HMRC will not seek to revisit the valuation.

The ship should be valued unencumbered by any security sought (such as a mortgage given to a third party guarantor), to avoid any difficulties with circularity.