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HMRC internal manual

Tonnage Tax Manual

HM Revenue & Customs
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Partnerships: Outline

Computation of profit

Tonnage tax partner

For the purpose of calculating the profits of a tonnage tax company, the profits of a partnership are calculated as if the partnership were a tonnage tax company.

The profits calculated in this way are then apportioned to the company (and to any other tonnage tax partner) in the normal way, so that:

  • its share of any partnership tonnage tax profits is treated as (part of) its own tonnage tax profits,
  • an appropriate proportion of the partnership’s ‘relevant shipping profits’ (see TTM06010) will be franked by those tonnage tax profits, and
  • its share of any other profits or losses is treated as its own profits or losses arising outside the ring-fence

If there is more than one tonnage tax company in the partnership then each such company calculates its partnership profits on the basis of a single computation worked out using the tonnage tax rules.

If other corporate partners become tonnage tax companies at a later date, or if new tonnage tax companies join the partnership, those companies will simply change from computing their share of the profits computed on normal lines to computing their share of the profits computed on tonnage tax lines.

Non-tonnage tax partners

If the partnership includes partners other than tonnage tax companies, then a separate computation of the whole partnership profit is required, computed on normal lines. The non-tonnage tax partners’ shares of profit are a share of that separate computation.

Multiple computations

In theory, there could be several types of partner in one corporate partnership. A separate computation will be required for each type of partner, for example

  • Tonnage tax company – computes its share as if the partnership were a tonnage tax company
  • Non-tonnage tax company – computes its share using normal rules for computation of total partnership profits (under CTA09/S1259)
  • Individual – computes his share using normal rules for computation of total partnership profits (under CTA09/S1258)

Non-resident partners

A separate computation will also be required to calculate the profits of a non- resident partner.

The normal rule is that a non-resident should compute his share of the partnership profits using the normal rules for computation of total partnership profits, but only to the extent that those profits are derived from the carrying on of a trade or business in the United Kingdom (see DT1750).

However, the normal rule may be amended by the terms of the Double Taxation Agreement (if any) with the non-resident’s country of residence. In many cases, the specific DTA may direct that profits derived from the operation of ships in international traffic will fall to be excluded from the computation of the non- resident’s share of the partnership profits.


FA00/SCH22/PARA131 (calculation of partnership profit) TTM17731
SI00/2303/REG10 (rules for calculating tonnage tax profits) TTM18010