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HMRC internal manual

Tonnage Tax Manual

Partnerships: Outline of the tonnage tax rules for partnerships

FA00/SCH22/PARA130 enables the HMRC to make regulations as to the application of FA00/SCH22 to companies carrying on activities in partnership.  These regulations are in ‘The Tonnage Tax Regulations’ SI00/2303.

For tonnage tax purposes, a corporate (or company) partnership is any partnership of two or more persons where at least one partner is a company.  A shipping company may carry on all or part of its shipping business through a corporate partnership.

The Tonnage Tax Regulations

SI00/2303/REG8 to REG13 provide special rules for dealing with corporate partnerships within the tonnage tax regime.

Although the primary legislation allows for regulations to be drafted on the basis of a ‘qualifying partnership’ the Tonnage Tax Regulations as written actually follow the existing treatment of corporate partnerships much more closely.  The concept of a ‘qualifying partnership’ is in fact not used.

The ‘look through’ approach

Broadly speaking, the general rule for tax purposes is that each corporate partner is treated as if it carries on for itself the appropriate share of the business carried on by the partnership (seeCTM36505 for more information on the general rules for corporate partnerships).

This ‘look-through’ approach is followed for tonnage tax purposes. Where a tonnage tax company carries on qualifying activities through a partnership, it must compute its share of the profits from those activities on tonnage tax lines. Other partners still use the normal rules to compute their share of profits.

Applying the tonnage tax legislation to partnerships

The Tonnage Tax Regulations provide the framework for when a partnership includes one or more tonnage tax companies. In particular, they deal with the following:

  • Charters to the partnership by partners (see TTM13110)
  • The strategic and commercial management test (see TTM13130)
  • The 75 per cent test on chartering-in (see TTM13140)
  • Chargeable gains on assets used by partnership (see TTM13200)
  • Transfer-pricing across the ring-fence (see TTM13300)
  • Ship finance provided under a finance lease (see TTM13310)
  • Partners leaving tonnage tax (see TTM13410)


FA00/SCH22/PARA130 onwards (application to partnerships) TTM17726
SI00/2303/REG8 to REG13 (The Tonnage Tax Regulations 2000) TTM18008