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HMRC internal manual

Tonnage Tax Manual

Schedule 22 Finance Act 2000: Part VII the ring fence - Para 57 exclusion of relief or set-off against tax liability

FA00/SCH22/PARA57

(1) Any relief or set-off against a company’s tax liability for an accounting period does not apply in relation to-

(a) so much of that tax liability as is attributable to the company’s tonnage tax profits, or

(b) so much of that tax liability as is attributable to tonnage profits of a CFC apportioned to the company at step 3 in section 371BC(1) of the Taxation (International and Other Provisions) Act 2010

(2) Relief to which this paragraph applies includes, but is not limited to, any relief or set-off under-

(a) sections 2 and 6 of the Taxation (International and Other Provisions) Act 2010 (double taxation relief by agreement with territories outside the United Kingdom),

(aa)Section 18(1)(b) and (2) of that Act (unilateral relief from double taxation), or

(b) regulations under section 32 of the Finance Act 1998 (unrelieved surplus advance corporation tax).

(3) Sub-paragraph (1)(b) applies whether or not the company to which the profits are apportioned is subject to tonnage tax.

(4) For the purposes of sub-paragraph (1)(b)-

(a) “tonnage profits” means so much of the chargeable profits of the controlled foreign company as, on the assumptions in Schedule 24 to the Taxes Act 1988, are calculated in accordance with paragraph 4 of this Schedule; and

(b) so much of those chargeable profits as are tonnage profits shall be apportioned at step 3 in section 3718C(1) of the Taxation (International and Other Provisions) Act 2010 in the same proportions as those chargeable profits (taken generally) are apportioned.

(5) For the purposes of any such regulations as are mentioned in sub-paragraph (2)(b), a company’s tonnage tax profits shall be left out of account in determining the company’s profits charged to corporation tax.

This does not affect the computation under those regulations of shadow ACT on distributions made by a tonnage tax company, whether paid out of tonnage tax profits or other profits.

(6) This paragraph does not affect-

(a) any reduction under section 19, 20 or 21 of the Corporation Tax Act 2010 (marginal relief for companies with small profits), or

(b) any set off under section 967 or 968 of the Corporation Tax Act 2010  (set off for income tax borne by deduction).

References

Deductions from tax liability TTM07210