TTM06140 - Relevant shipping profits: Secondary activities qualifying up to set limits
Work carried out for third parties: Activities outside the ring fence
Companies may prefer to separate out secondary activities carried on for third parties and compute and return the profit on such activities outside the ring-fence. In such cases, officers should only look at the third-party work still conducted within the tonnage tax ring-fence in applying the test to determine whether third-party work was minimal.
Example 1
A ship operator within tonnage tax has a substantial ship management department providing services to third parties as well as other members of the group. It divides its 32 staff into 12 managing group ships and a dedicated section of 20 staff doing third party ship management. The third-part department is accepted as outside the ring fence. But 20 third-party staff do occasional work to help the in-house department.
- This work should be transfer-priced across the ring-fence, and the appropriate tax- adjusted commercial profit assessed on the third-party department.
Example 2
As for Example 1, but the 12 in-house staff do occasional work for the third-party department.
- Provided this is minimal in comparison with the core and wholly qualifying activities of the company, then any profit from that third-party work would be within tonnage tax. HMRC would accept the level was ‘minimal’ if the activities to help the third-party department did not amount to more than 20% of the in-house work.
References
| SI00/2303/REG3 (4)(a) (permitted levels) | TTM18003 |