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HMRC internal manual

Tonnage Tax Manual

HM Revenue & Customs
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Exiting tonnage tax: Effects of exiting tonnage tax regime

The consequences of leaving the tonnage tax regime are as follows.

  • A new accounting period commences on the day following the final day in tonnage tax (expiry of election, ceasing to qualify or as specified in notice) for all previously qualifying tonnage tax companies (FA00/SCH22/PARA52).  See TTM07010.
  • Trading losses of the trade that became the tonnage tax trade from periods before tonnage tax are not re-instated (PARA56 (1)).  See TTM07220.
  • Free depreciation (postponed capital allowances) taken into frozen pool is not re-instated (PARA69 (4) and PARA85).  See TTM09010.
  • Capital gains tax losses brought forward from outside the ring fence continue to be available, (see TTM08020), but not against an exit charge, (see TTM14210).
  • For capital allowances, a company is put broadly into the position it would have been in if it had never been subject to tonnage tax (PARA68 (2)(c)).  To achieve this, the capital allowance regime is re-instated in accordance with PARA85, with SI00/2303/REG4, REG5, REG6 and REG8 (plant and machinery) and PARA86 (industrial buildings – pre Financial year 2011).  See TTM09300 onwards.
  • For all cases, except on expiry of an election, there is a ten-year disqualification from re-entry into tonnage tax (PARA137 (3) and PARA140).  See TTM14110.
  • Where a company or group ceases to be a qualifying company for reasons relating wholly or mainly to tax (TTM14120), or is excluded for tax avoidance (paragraph 137), there is a special exit charge (PARA138 and PARA139).  See TTM14200.


FA00/SCH22/PARA52 (accounting period ends on entry or exit) TTM17301
FA00/SCH22/PARA56 (exclusion of loss relief) TTM17321
FA00/SCH22/PARA68 (ring fence: capital allowances: general) TTM17381
FA00/SCH22/PARA69 (reference to postponed capital allowances) TTM17386
FA00/SCH22/PARA85 (exit: plant and machinery) TTM17466
FA00/SCH22/PARA86 (exit: industrial buildings) TTM17471
FA00/SCH22/PARA137 (company ceases to be tonnage tax company) TTM17761
FA00/SCH22/PARA138 (exit charge: chargeable gains) TTM17766
FA00/SCH22/PARA139 (exit charge: balancing charges) TTM17771
FA00/SCH22/PARA140 (10 year disqualification) TTM17776
SI00/2303/REG4 (plant and machinery: writing down basis) TTM18004
SI00/2303/REG5 (expensive motor cars: writing down basis) TTM18005
SI00/2303/REG6 (long-life assets: writing down basis) TTM18006
SI00/2303/REG8 (corporate partner leaves Tonnage Tax) TTM18008