D7.1014 Relevant shipping profits

Corporate tax
Corporate tax | Commentary

D7.1014 Relevant shipping profits

Corporate tax | Commentary

D7.1014 Relevant shipping profits

'Relevant shipping profits' are defined as income from tonnage tax activities, certain dividends from overseas subsidiaries, certain interest and certain chargeable gains1. Prior to HMRC's published change of view (D7.1004), where vessels provided transport for services at sea, only the transportation element was relevant shipping profits (see below).

Tonnage tax activities

Central to the definition of 'relevant shipping profits' is the concept of 'tonnage tax activities'. Tonnage tax activities comprise:


    (a)     core qualifying activities


    (b)     qualifying secondary activities up to a permitted level; and


    (c)     qualifying incidental activities

Activities that give rise to investment income, such as owning shares or holding bank deposits, are explicitly excluded from the definition, although some investment income is included2. Each of these categories is discussed below. (For HMRC's view on prior year adjustments, see HMRC Tonnage Tax Manual TTM06040).

Core qualifying activities

Core qualifying activities are the activities carried out in operating a company's own qualifying ships, plus other activities that are necessary and integral to the operation of its own qualifying ships (eg, crewing, provisioning, route planning etc)3. Where a vessel provides transport for services at sea, the profits or losses must be allocated between transport and the service provided on a just and reasonable basis. Only the transport element can be within tonnage tax4.

Qualifying secondary activities

Qualifying secondary activities are ship-related activities that are usually provided as part of the provision of qualifying shipping activities, either for the company or other group members5. They include:


    (a)     the carriage of passengers or cargo

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