PATRON NEWS
UK TONNAGE TAX: TIME FOR SHIPPING FIRMS TO RECONSIDER? James Strang, tax partner, RSM UK, provides the lowdown on tonnage tax.
If you are a UK-based shipping group, or are looking to acquire a shipping group, now is the time to reconsider the tonnage tax regime. Shipping groups within the UK tonnage tax regime do not pay corporation tax on their qualifying shipping activities. Instead, such shipping profits are subject to a small tax charge, which is effectively a “peppercorn rent” based on the tonnage of the vessels operated. As a result, the amount payable can often be a fraction of the amount of tax that would normally be payable.
Key requirement To qualify, both strategic and commercial management must take place in the UK. Many other countries have similar rules, which are all designed to encourage shipping groups to locate themselves there.
Image by Tom Fisk @ Pexels
Brexit There has been much debate around both the political and economic impact of Brexit. Changes to the tonnage tax regime following Brexit have all been positive though, and aim to boost the UK’s maritime sector, by reducing administrative burdens and making it easier for shipping companies to operate. Before Brexit, ships had to be registered under an EU or EEA flag to qualify for the tonnage tax. Post Brexit, this requirement was lifted, allowing ships under the UK regime to qualify without needing an EU or EEA flag. This is a significant change.
• The limit on capital allowances has been increased from £80 million to £200 million for lessors who lease ships to companies which are subject to the UK Tonnage Tax regime. This change, which was introduced in 2024, should encourage the leasing of ships in the UK, as lessors will be able to obtain a much greater tax deduction (and thus significantly reduce their tax bills).
Other positive changes include:
• April 2023 saw the UK corporation tax rate increased significantly from 19% to 25%. This was the first time the UK main rate had been increased since 1974! As a result, the amount of tax saved by being in the regime has increased further.
• Ship management companies, and not just operators, are now eligible for the regime. This is a positive development that should align the UK regime with those of our international competitors.
Brexit was a catalyst for many shipping companies to move overseas, however, now the rules around tonnage tax are more favourable, many of these businesses may consider returning.
Liverpool Chamber
There has been much debate around both the political and economic impact of Brexit. Changes to the tonnage tax regime following Brexit have all been positive though, and aim to boost the UK’s maritime sector, by reducing administrative burdens and making it easier for shipping companies to operate. 33