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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

Reasons relating wholly or mainly to tax

Exits for reasons relating wholly or mainly to tax issues result in an exit charge, FA00/SCH22/PARA137 (2)(a).

Circumstances where this might apply include:

  • Engineering an exit through the 75 per cent test (although there is discretion not to exclude in some cases).
  • Manipulation of corporate structures and/or the merger provisions to achieve an exit (perhaps recognised by a rapid demerger following the exit).
  • Migration overseas and then re-migration back to the UK.
  • ‘Phoenix’ company taking over business assets.
  • Temporary cessation of all qualifying activities.

Where there is evidence that the company or group has left the regime for reasons relating wholly or mainly to tax issues, the case should be submitted for consideration to the Tonnage Tax Technical Adviser.

HMRC will not seek to apply exit charges if:

i) the company has reached the natural expiry date of its election (even if the reason that the company chooses not to renew its election is ‘relating wholly or mainly to tax’, for instance, if the reason for not renewing is that it wishes to utilise shipping losses); or

ii) the company has good commercial reasons, aside from considerations of tax, for leaving tonnage tax; or the company is wound up, except in circumstances where company liquidations are a feature of a group scheme to engineer a deliberate exit from tonnage tax; or

iii) the company leaves the UK except in circumstances where the change in company residence is a feature of a group scheme to engineer a deliberate exit from tonnage tax; or

iv) the company ceases to be a tonnage tax company as a result of the operation of the rules on mergers.


FA00/SCH22/PARA137 (company ceases to be tonnage tax company) TTM17761
Exit charge: chargeable gains TTM14210
Exit charge: balancing charges TTM14220
Contact points TTM01120