TTM01040 - Legislative changes following the 2021 review

Finance Act 2022

FA22/S25 reduced from ten years to eight years the period for which a tonnage tax election remains in force from the beginning of the accounting period in which it is made. In addition, HMRC may admit elections made outside the normal period allowed for election where there appears to be a good reason to do so.  

The flagging rules introduced in 2005 were removed and the rule which, subject to conditions, includes dividends or other distributions of overseas shipping companies in relevant shipping profits was simplified. 

The FA22/S25 provisions came into force on 1 April 2022, the distributions of overseas companies amendment applies to APs beginning on or after that date.

 

Finance Act 2024

FA24/SCH8 introduced the ability to elect for tonnage tax for companies that manage ships, provided certain conditions are met. The daily profit for managed ships was set at 1/5 that of operated ships.  The amendments apply in relation to elections made on or after 1 April 2024.  As respects tonnage tax elections made before 1 April 2024, FA00/SCH22/PARA 1(2) provides that all companies that are members of a group must join in a group election.  Where there is at 1 April 2024 an existing group election and a group company which is not a ship operator within FA00/SCH22/PARA18, but is a ship manager within the new FA00/SCH22/PARA18A added by FA24/SCH8, it will become a qualifying company of the tonnage tax group on that date treated as making an election.

FA24/S10 increased the cap of capital allowances for ship leasing into tonnage tax from £80m to £200m. The first £100m is subject to writing down allowance at the main rate, with the second £100m at the special rate.  It applies to leases entered into on or after 1 April 2024.