BLM80338 - Sale of lessor companies and similar arrangements: entry into tonnage tax
CTA 2010/S394ZA
This guidance applies where the company joins a tonnage tax group and enters tonnage tax at the same time and the relevant day falls on or after 21 March 2012. Where the company joins a tonnage tax group but does not enter tonnage tax at the same time this guidance applies if the relevant day falls on or after 23 April 2012.
S394ZA adds a further trigger event - a lessor company becoming part of a tonnage tax group.
The tonnage tax regime is an optional regime that applies to companies that operate ships that satisfy certain conditions. The scope of the regime extends to cover companies that do not operate ships themselves but own ships and lease them to fellow group members who themselves operate the ships.
Opportunities for companies to enter the tonnage tax regime are limited but a company can become eligible if it joins an existing tonnage tax group.
The membership of a tonnage tax group is determined by reference to common control over the affairs of the companies. This control is not dependent on shareholdings or the economic ownership of the lessor company so that a move into a tonnage tax group will not necessarily trigger the effect of the sale of lessor provisions.
Once in tonnage tax the company forfeits its entitlement to capital allowance and access to losses and benefits from a low tax rate calculated on the basis of the tonnage of the ship. The change in basis means that profits deferred for tax purposes are not brought into charge.
S394ZA specifies that there is a relevant change in the relationship between A and a principal company when A becomes a member of a tonnage tax group. The relevant day for the purposes of the legislation is:
- the day on which A becomes a member of the tonnage tax group if if joins the group but does not enter tonnage tax at the same time; or
- the day before A becomes a member of the tonnage tax group if A also enters tonnage tax on that day.
Wherever section 394ZA is in point, even when there are other events on that day that would trigger the effect of the legislation, the qualifying change of ownership is treated as occurring as a consequence of section 394ZA.