TTM13150 - Partnerships: Operation of ships

75% limit on chartering in to partner: Example

Beau Ltd is a singleton tonnage tax company.  For the accounting period year ended 31 December 2013 it has:
 

  • a 50% share in a corporate partnership, Beau-Geste Ferries,
  • a 25% 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 bareboat 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 calculated as follows:
 

-Beau-Geste FerriesBeau-Regarde Ferries
Step OneAggregate 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 TwoTonnage chartered in (ton-days)1 x 5,000 x 365 = 1,825,0001 x 4,000 x 184 = 736,000
-% chartered in0.250.2
Step ThreeShare in partnership property50% x 7,300,000 = 3,650,000 ton-days25% x 3,656,000 = 914,000 ton-days
-Allocation of chartered in tonnage in Step 225% x 3,650,000 = 912,500 ton-days20% x 914,000 = 182,800 ton-days
Step FourTotal share of tonnage operated3,650,000 + 914,000 = 4,564,000 ton-days-
-Share of tonnage chartered in912,500 + 182,800 = 1,095,300 ton-days-
Step FiveOwn tonnage2 x 3,000 x 365 = 2,190,000-
-Total own and partnership tonnage2,190,000 + 4,564,000 = 6,754,000 ton-days-
-Own and partnership tonnage chartered in2,190,000 + 1,095,300 = 3,285,300 ton-days-
Step SixAggregate percentage chartered in48.64%-
-Apply 75% chartered in limit to Step Six resultBeau Ltd is below the 75% limit for this accounting period-

References

75% limit on chartering in to partner  TTM13140