- 6th December 2017
UK economy and shipping industry benefit from Tonnage Tax
The Tonnage Tax (TT) regime was introduced to the UK in 2000 and has helped to increase the number of shipping companies based in the UK and has led to a rise in the number of individuals employed in the UK shipping industry.
The decline of UK merchant fleet and reduction in the level of UK seafarer training brought about the need to take action and create a more economically attractive environment for UK based international shipping companies and for overseas investment. The way tax is calculated for shipping companies was re-structured and the Tonnage Tax was introduced. TT can be used instead of corporation tax for UK based shipping companies. Profit is calculated based on net tonnage per ship rather than on actual profits from shipping activities. The regime was introduced in 2000 to enable the regeneration and development of existing UK based companies.
For a company to choose to pay Tonnage Tax they must be:
- A qualifying company
- Have qualifying ships
- Meet certain obligations to train seafarers
The qualifying conditions can be viewed here: https://www.gov.uk/guidance/tonnage-tax-for-shipping-companies#qualifying-conditions.
Once a company elects to pay Tonnage Tax, they are bound for a minimum period of 10 years.
The Centre for Economics and Business Research (CEBR) conducted a study into the economic value of Great Britain’s shipping industry on behalf of Maritime UK. The study found that without Tonnage Tax, there would be:
- £410 million less in tax contributions
- 37,000 fewer jobs
- £3.7 billion in exports of seaborne transport services
“The CEBR study clearly shows the positive economic effects of Tonnage Tax – and long may this continue,” says Gavin Simmonds, the UK Chamber of Shipping’s Policy Director – Commercial. “We’re hoping to increase this contribution and the attractiveness of UK Tonnage Tax and make the country more open to international shipping investment. This should include bringing new companies into the regime.”
The Tonnage Tax regime is currently under review and the UK Chamber of Shipping want to make it more attractive to UK based shipping companies and to open the UK up more to investment from international shipping businesses.
- Clyde & Co – https://www.clydeco.com/insight/article/uk-tonnage-tax
- Watson, Farley & Williams – http://www.wfw.com/wp-content/uploads/2009/06/WFW-UKTonnageTaxLegislation.pdf
- HM Revenue & Customs – https://www.gov.uk/guidance/tonnage-tax-for-shipping-companies#qualifying-conditions
- UK Chamber of Shipping – https://www.ukchamberofshipping.com/latest/tonnage-tax-shows-shippings-multi-billion-pound-impact-uk-economy/
- Maritime UK – https://www.maritimeuk.org/value/