Is the UK chancellor’s announced review of its tonnage tax a timely convenience for shipping?

The latest budget from the UK Chancellor has promised a review of the UK tonnage Tax that brings vessels under the UK merchant flag

Every year the UK’s Chancellor reveals a government budget, showing how taxpayers money will be spent. In this autumn’s budget, UK shipping gets a mentionNot only is there a review of the UK tonnage tax system to encourage shipping companies (and now even potentially ship mangers) to relocate to the UK ( a clear nod to post Brexit shipping), but also a  promise to further support of the country’s focus on clean shipping.


This includes turning the country’s Clean Maritime Demonstration Competition to become a multi-year programme, “aiming to deliver real life demonstrations and technology trials of clean maritime vessels and infrastructure to decarbonise the maritime sector”.


This is part of the government’s commitment to a UK Shipping Office for Reducing Emissions (UK-Shore).


The text within the budget relating to the Tonnage Tax reforms are copied below

 The UK’s Tonnage Tax regime from April 2022. These reforms aim to see more firms basing their headquarters in the UK, using the UK’s world-leading maritime services industry, and flying the UK flag.

As part of these reforms, the Government will:


• remove any requirement for ships in the UK Tonnage Tax regime to fly the flag of any EU country now the UK has left the EU, and instead focus on boosting the use of the UK flag when determining which companies can participate in the regime. The UK flag has a reputation for maintaining the highest international standards and the government wants more ships to benefit from this by registering in the UK


• make it easier for shipping companies to participate in the Tonnage Tax regime by reducing the lock-in period from 10 years to 8 years to align more closely with shipping cycles. HMRC will be given more discretion to admit companies into the regime outside of the initial window of opportunity where there is a good reason. HMRC will also review guidance on which vessels and operations qualify for the regime to take account of developments in technology and the shipping market since the tax was introduced


• raise from 10% to 15% the permitted limit for qualifying secondary (ancillary, passenger-related) income in HMRC practice guidance, following a review by HMRC aimed at smoothing administration


• explore how best to make use of existing powers regarding the training commitment


• review whether to include ship management within scope of the Tonnage Tax regime, and whether the existing limit that can be claimed in capital allowances by organisations leasing ships to Tonnage Tax participants remains appropriate 

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