TTM02001 - Tonnage Tax Elections: Outline

Optional regime

As Tonnage Tax is an optional regime a qualifying company or group may decide whether or not to elect into Tonnage Tax. All companies in a tonnage tax group must come in or stay out together (paragraph 1(2)). This is to prevent ‘cherry picking’, whereby a group could leave loss-making companies outside Tonnage Tax and only bring in profitable companies.

Without an election the normal Corporation Tax rules apply.

A ‘tonnage tax company’ or ‘tonnage tax group’ means, per paragraph 2(1), a company or group to which a tonnage tax election has effect.

Pre-election non-statutory clearance

In order to provide shipping businesses with some certainty as to their qualification for Tonnage Tax, HM Revenue & Customs (HMRC) provides a clearance procedure.

This pre-election clearance procedure is available to enable any company or group interested in Tonnage Tax to discuss its own circumstances with HMRC in advance of making the initial election.

All clearance non-statutory business clearance correspondence will be handled by the Tonnage Tax Unit. The guidance at TTM02010 to 02060 is for general information about issues in the clearance procedure.

See TTM02010 onwards.

Elections

Elections may be made by singleton companies and by groups. Where a group election is made it must cover all qualifying companies in that group (see TTM02100).

The election will normally take effect from the start of the accounting period in which it is made, but existing shipping businesses are given some flexibility to backdate (see TTM02210), or defer (see TTM02220 & TTM02230), their entry into the regime.

Once made, an election will normally remain in force for a period of ten years (see TTM02500). But the election may be renewed before it expires (see TTM02600).

Following changes to the TT legislation in FA 2005 and FA 2008, companies were given the opportunity to withdraw from TT.(see TTM02700).

Windows of opportunity

For both companies qualifying as at the date of Royal Assent, and companies first qualifying after that date, there are ‘windows of opportunity’ for making the election (see TTM02150 and TTM02160)

Outside these periods a company or group that previously qualified for TT will be unable to enter Tonnage Tax unless the Treasury allow under paragraph 11 a further period, (see TTM02180).

References