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HMRC internal manual

Tonnage Tax Manual

From
HM Revenue & Customs
Updated
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Offshore activities: Offshore profits

Chargeable gains

A period during which an asset is used for the purposes of offshore activities is treated for the purposes of FA00/SCH22/PARA65 (chargeable gains on disposal of tonnage tax asset) as if it were a period during which the asset was not a tonnage tax asset.

The effect of this is that gains accruing over the period when an asset is used for offshore activities are excluded from the definition of relevant shipping profits in PARA65.

Such gains are therefore chargeable to tax in the normal way.  Conversely, any losses attributable to the period of use for offshore activities will be allowable.

Example

A company owns a tonnage tax asset for 10 years and then sells it, realising a gain of £1,000.  During the period of ownership it was used for the purposes of offshore activities for a total of four years.  The company was a tonnage tax company throughout the period of ownership.

£600 of the gain (6/10 x £1000) will be included in the company’s relevant shipping profits (and will thus not in practice be chargeable to tax)

£400 of the gain (4/10 x £1000) will be chargeable to corporation tax in the normal way (subject of course to any relief for losses brought forward etc)

References

FA00/SCH22/PARA109 (chargeable gains on offshore assets) TTM17621
   
FA00/SCH22/PARA65 (chargeable gains on disposal of TT asset) TTM17366
Time apportionment of chargeable gains TTM08200