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HMRC internal manual

Tonnage Tax Manual

Partnerships: Operation of ships

75 per cent limit on chartering-in to partner: Example

Beau Ltd is a singleton tonnage tax company with, for the accounting period year ended 31 December 2013:
 

  • a 50 per cent share in a corporate partnership, Beau-Geste Ferries,
  • a 25 per cent share in another corporate partnership, Beau-Regarde Ferries, and
  • two 3,000-ton vessels (time-chartered-in), which it operates on its own account.

Beau-Geste Ferries operates four 5,000-ton vessels, of which:
 

  • three are bare boat chartered-in, and
  • one held on a time charter for the whole of the 12-month accounting period.

Beau-Regarde Ferries operates two vessels:
 

  • one 8,000-ton vessel bareboat chartered-in for the whole of the 12-month accounting period, and
  • one 4,000-ton vessel time chartered-in for the last 6 months of the accounting period.

Beau Ltd’s percentage of chartered-in tonnage is worked out as follows:
 

  Beau-Geste Ferries Beau-Regarde Ferries
     
Step One Aggregate Tonnage (in ton-days) 4 x 5,000 x 365=
7,300,000 (8,000 x 365) +

(4,000 x 184) =

3,656,000      
  Step Two Tonnage chartered in (ton-days) 1 x 5,000 x 365 =
1,825,000 1 x 4,000 x 184 =
736,000        
    % chartered in 0.25 0.2
  Step Three Share in partnership property 50% x 7,300,000 =  
3,650,000 ton-days 25% x 3,656,000 =
914,000 ton-days      
    Allocation of chartered-in tonnage in Step 2 25% x 3,650,000 =
912,500 ton days 20% x 914,000 =
182,800 ton days      
  Step Four Total share of tonnage operated 3,650,000 + 914,000 = 4,564,000 ton days
    Share of tonnage chartered-in 912,500 + 182,800 = 1,095,300 ton days
  Step Five Own tonnage 2 x 3,000 x 365 =
2,190,000      
    Total own and partnership tonnage 2,190,000 + 4,564,000 = 6,754,000 ton days
    Own and partnership tonnage chartered- in 2,190,000 + 1,095,300 = 3,285,300 ton days
  Step Six Aggregate percentage chartered- in 48.64%
    Apply 75% test to Step Six result Beau Ltd is below the 75% limit for this accounting period

References

75 per cent limit on chartering-in to partner TTM13140