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HMRC internal manual

Tonnage Tax Manual

HM Revenue & Customs
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Offshore activities: Offshore profits

Pre-commencement losses

Apportionment required

When a company enters tonnage tax, any accumulated losses that relate to its tonnage tax trade (or to any other sources that form part of its relevant shipping income for tonnage tax purposes) will not normally be available for relief in any period beginning on or after its entry into tonnage tax.

The basic rule is in FA00/SCH22/PARA56, and detailed instructions on this are at TTM07220.

Any losses attributable to offshore activities are treated as if they did not arise from the tonnage tax trade (FA00/SCH22/PARA108), and so they will remain available to set off against profits outside the ring fence arising after entry into tonnage tax.

The accumulated losses at the date of entry will therefore need to be apportioned between those losses for which no relief is available, and those losses for which relief is available.  See the example below.

Just and reasonable apportionment

The legislation does not specify how the apportionment is to be made.  It simply says in FA00/SCH22/PARA56 (2) that any apportionment necessary ‘shall be made on a just and reasonable basis’.  Clearly, before any apportionment is made it will be necessary to establish how the losses have arisen and where the vessel(s) were working when the losses were sustained.

For instance if it were established that the area of operations in the past was exclusively on the UKCS all the losses would be available to be carried forward.

Where information is incomplete or difficult to obtain reasonable estimates may be accepted.

Consult the Tonnage Tax Technical Adviser in case of doubt or difficulty.


An example may be found at TTM11240.


FA00/SCH22/PARA56(2) (exclusion of loss relief) TTM17321
Contact points TTM01120