TTM14100 - Exiting Tonnage Tax: Effects of exiting tonnage tax regime

The consequences of leaving the Tonnage Tax regime are as follows.

• A new accounting period commences on the day following the final day in Tonnage Tax (expiry of election, ceasing to qualify or as specified in notice) for all previously qualifying tonnage tax companies (paragraph 52). See TTM07010.
• Trading losses of the trade that became the tonnage tax trade from periods before Tonnage Tax are not re-instated (paragraph 56(1)). See TTM07220.
• Free depreciation (postponed capital allowances) taken into frozen pool is not re-instated (paragraphs 69(4) and 85). See TTM09010.
• Capital gains tax losses brought forward from outside the ring fence continue to be available, (see TTM08020), but not against an exit charge, (see TTM14210).
• For capital allowances, a company is put broadly into the position it would have been in if it had never been subject to Tonnage Tax (paragraph 68(2)(c)). To achieve this, the capital allowance regime is re-instated in accordance with paragraph 85, with regulations 4, 5, 6 and 8 of The Tonnage Tax Regulations 2000 (plant and machinery) and paragraph 86 (industrial buildings). See TTM09300 onwards.
• For all cases, except on expiry of an election, there is a ten-year disqualification from re-entry into Tonnage Tax (paragraphs 137(3) and 140). See TTM14110.
• Where a company or group ceases to be a qualifying company for reasons relating wholly or mainly to tax (TTM14120), or is excluded for tax avoidance (paragraph 137), there is a special exit charge (paragraphs 138 and 139). See TTM14200.

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