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HMRC internal manual

Tonnage Tax Manual

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HM Revenue & Customs
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FA2005 opportunity to exit tonnage tax

Following the revised EU guidelines on State aid to the maritime transport industry in 2004 it became necessary for companies engaged in port towage to leave tonnage tax.  In order to ease their departure the Government provided for a relaxation of the exit rules for all companies in tonnage tax, providing two conditions are met:

Condition 1 is that the withdrawal notice has to be given in the period beginning on the day FA2005 received Royal Assent (7 April 2005) and ending on 31 March 2006.

Condition 2 is that a tonnage tax election has been in force for the whole of the three years ending on 7 April 2005 in respect of the company or group for which the withdrawal notice is given.

Where notice is given which meets these conditions the withdrawal takes effect at the end of the accounting period that precedes the first accounting period to begin after 1 July 2005.  This means for example:

 

Company year ending:    
     
31 December First accounting period to begin after 1 July 2005 is that commencing 1 January 2006 Withdrawal therefore takes effect from 31 December 2005
         
  30 June First accounting period to begin after 1 July 2005 is that commencing 1 July 2006 Withdrawal therefore takes effect from 30 June 2006  

The Finance Act 2005 also contains provision permitting the Treasury to provide further periods during which withdrawal notices may be given.

Where an election is made under these provisions the capital allowance rules on exiting the regime are relaxed, see TTM09305.

References

FA00/SCH 22/PARA15A (withdrawal notices) TTM17076
   
FA00/SCH 22/ PARA15B (power to provide further opportunities for withdrawal) TTM17081
FA05/SCH7/PARA3 TTM20003