TTM11120 - Offshore Activities Pre 2005: Vessels to which the special rules do not apply

There are certain types of qualifying ship to which the special rules do not apply, and which will stay within the normal Tonnage Tax regime even when they are engaged in offshore activities.

These are listed in paragraph 105:

• Offshore supply vessels: also known as platform supply vessels (PSVs) used to transport equipment, supplies & personnel between shore bases and offshore oil installations.
• Tugs: generally used to tow drilling rigs (and other vessels such as cargo barges) to and between the offshore locations.
• Anchor-handling vessels: used to position drilling rigs and the laying of large anchors on the sea bed (to keep the rig in position during drilling) and their retrieval once the rig is ready to move to the next location.
• Tankers: generally used to transport crude oil from offshore oil installations to oil refineries or terminals.

This list is exhaustive. However, where a vessel can undertake one or more of the functions related to the types of vessel listed above it may also be treated as a type to which the special rules do not apply. For example, some tugs also have anchor-handling capability. But see under multifunctional vessels below.

Multifunctional vessels

Certain more modern vessels are described as ‘multifunctional’ or ‘multipurpose’. They are constructed to undertake a variety of activities including:

• Anchor handling
• Towing
• Trenching
• ROV operation
• Cable laying
• Pipelaying
• Underwater construction work
• Helicopter operations
• Safety standby
• Supply

Whether or not they actually undertake any of these operations, provided they are capable of carrying out functions beyond those performed by vessels listed in paragraph 105 (to which special offshore provisions do not apply), such a vessel is not of a type listed in paragraph 105.

Therefore, where a multifunctional vessel is engaged in ‘offshore activities’ (see TTM11010) it will be within the special rules for calculation of its corporation (non-tonnage tax) profit.

Only where a previously multifunctional vessel has been physically converted back into a type which cannot carry out more than supply, anchor handling or tug activities would it be accepted as coming within the paragraph 105 exceptions. Such conversion does not include a multifunctional vessel which has had equipment for a particular function temporarily removed from it; the conversion must be permanent.

Doubtful cases

Whether or not a particular vessel falls within the above list of vessels is a question of fact, and the answer will be self evident in most cases. Please submit any difficult or doubtful cases to the Tonnage Tax Unit for advice after obtaining a technical brochure for the vessel and a copy of a recent contract for the use of the vessel.

The special rules do apply to all other qualifying ships engaged in offshore activities.

References