TTM03910 - Qualifying companies and ships: flagging - overview

FA00/Sch22/Para22A

If a year is not an excepted year (see TTM03905), then where a ship is registered or flagged can affect whether or not it is a qualifying ship for Tonnage Tax purposes.

If the financial year is not an “excepted year” then the following conditions need to be considered:

Condition 1: Is the company or group operating the ship for the first time? See TTM03915 

Condition 2: Is the average proportion of the company’s total tonnage that is community flagged less than 60% over a period beginning with the start of that financial year and ending on the day the company begins to operate the new ship? See TTM03920 

Condition 3: Is the average percentage of the company’s total tonnage which is registered in a member state in the period in condition 2 above less than the percentage that was registered in a member state on the later of 17 January 2004 or the date at the end of the accounting period in which the company became a Tonnage Tax company? See TTM03925 

Condition 4: Is the ship that is operated for the first time registered on a register other than that of a member state? See TTM03945 for guidance on what constitutes the register of a member state.

If all four conditions are met then the ship will not qualify for tonnage tax whilst it is operated by that company.

Where, when it starts to operate the ship, the company is a member of a Tonnage Tax group, then the ship will not qualify for tonnage tax whilst it is operated by a company that is a member of that Tonnage Tax group.

If the company begins to operate a ship that is not a qualifying ship because the conditions are satisfied, then the company has the option to re-register the ship onto the register of a member state. If the ship is registered in a member state within 3 months of the date the company operated the ship for the first time then the ship will satisfy the flagging requirements and, provided the other conditions are met, will qualify for Tonnage Tax.

Alternatively, where the four conditions are met, the company can elect to register a substitute qualifying vessel onto the register of a member state see TTM03930. In this situation, provided the other conditions are met, both the vessel that the company has started to operate and the substitute vessel will qualify for TT.

References