TTM03515 - Qualifying companies and ships: certification of ships

Certification of ships

The legislation requires that a ship is certificated as seagoing. A ship does not need any special form of certification to qualify for Tonnage Tax. This is not a question of tax law, but of merchant shipping legislation.

The question is whether the appropriate authorities have issued a certificate in accordance with the relevant merchant shipping legislation that allows the ship to lawfully operate at sea.

Certificates issued under international conventions

Ships making international voyages will need to be certificated under various international conventions. HMRC will accept that a ship is a seagoing ship if:

• it has an ‘International Load Line Certificate’, or an ‘International Load Line Exemption Certificate’. (The exemption certificates are issued to unconventional ships which are seagoing but for which a conventional load line my be inappropriate, e.g. a hydrofoil or hovercraft), or
• it has a certificate issued under the International Convention for the Safety of Lives at Sea (SOLAS), and has a Certificate of Compliance with the ISM code
• the company has a Safety Management Certificate and each vessel has a Document of Compliance in accordance with the ISM code.

Certificates issued under domestic legislation

The position is more complicated for ships which are not engaged in international traffic, as they are not necessarily covered by the international conventions, and certificates may be issued under domestic law. In the case of the UK this is the Merchant Shipping Acts. Qualifying ships must be certificated for navigation at sea.

In such cases it will also be necessary to consider the ‘conditions’ or ‘plying limits’ imposed by the certificate to determine if the ship is ‘seagoing’. If those conditions or plying limits indicate that the ship may only operate in sheltered waters then it is not a ‘seagoing ship’.

United Kingdom

In the case of the UK, the waters around the coast of the UK are categorised by the Maritime & Coastguard Agency (MCA) under the Merchant Shipping Acts to distinguish between what is ‘sheltered’ waters (Categories A-D) and what is ‘sea’.

If the MCA, as the competent authority for the UK, issues a certificate that allows the ship only to operate in waters of Categories A-D then that ship does not qualify for Tonnage Tax as it has not been certificated as seagoing. (See TTM03530)

Some Passenger Certificates may be very restricted in the area and time a ship may operate at sea. For guidance on these certificates see TTM03520.

Companies operating sea going ships must have a Safety Management Certificate and each vessel must have a Document of Compliance in accordance with the ISM code.

Overseas

Where ships are registered outside the UK, a ship is “seagoing” if the competent authority for that country has certificated the ship to operate in waters that they regard as ‘sea’ rather than ‘sheltered’.

Further advice

In cases of doubt or difficulty Compliance Offices should contact the Tonnage Tax Unit in Liverpool LBS for advice.

The Tonnage Tax unit also acts as the liaison between HMRC and the Maritime and Coastguard Agency.

References