Legalize / United Kingdom / Public General Act

Finance Act 2000

Type Public General Act

Publication 2000-07-28

Last updated 2026-04-07

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

Reform history JSON API

(82A) (1) Notwithstanding anything in section 74, where a person carrying on a trade incurs expenditure not of a capital nature on research and development— (a) related to that trade, and (b) directly undertaken by him or on his behalf, the expenditure incurred may be deducted as an expense in computing the profits of the trade for the purposes of tax. (2) For this purpose expenditure on research and development does not include expenditure incurred in the acquisition of rights in, or arising out of, research and development. Subject to that, it includes all expenditure incurred in carrying out, or providing facilities for carrying out, research and development. (3) The reference in subsection (1) above to research and development related to a trade includes— (a) research and development which may lead to or facilitate an extension of that trade; (b) research and development of a medical nature which has a special relation to the welfare of workers employed in that trade. (4) The same expenditure may not be taken into account under this section in relation to more than one trade. (5) In this section “research and development” has the meaning given by section 837A and includes oil and gas exploration and appraisal. (82B) (1) Notwithstanding anything in section 74, where a person carrying on a trade— (a) pays any sum to a scientific research association that— (i) has as its object the undertaking of scientific research related to the class of trade to which the trade he is carrying on belongs, and (ii) is for the time being approved for the purposes of this section by the Secretary of State, or (b) pays any sum to be used for such scientific research as is mentioned in paragraph (a) above to any such university, college research institute or other similar institution as is for the time being approved for the purposes of this section by the Secretary of State, the sum paid may be deducted as an expense in computing the profits of the trade for the purposes of tax. (2) In this section “scientific research” means any activities in the fields of natural or applied science for the extension of knowledge. (3) The reference in this section to scientific research related to a class of trade includes— (a) scientific research which may lead to or facilitate an extension of trades of that class; (b) scientific research of a medical nature which has a special relation to the welfare of workers employed in trades of that class. (4) If a question arises under this section whether, or to what extent, any activities constitute or constituted scientific research, the Board shall refer the question for decision to the Secretary of State. The decision of the Secretary of State is final. (5) The same expenditure may not be taken into account under this section in relation to more than one trade.

(2) Any approval given by the Secretary of State for the purposes of section 136(b) or (c) of the Capital Allowances Act 1990 and in force immediately before the commencement of this paragraph has effect as if given under section 82B(1)(a) or (b) of the Taxes Act 1988 as inserted by sub-paragraph (1) above.

(3) So far as is necessary for continuing its effect, any decision made by the Secretary of State under section 139(3) of the Capital Allowances Act 1990 before the commencement of this paragraph has effect as if given under section 82B(4) of the Taxes Act 1988 as inserted by sub-paragraph (1) above.

6

In Schedule 18 (group relief: equity holders and profits or assets available for distribution), in paragraph 1(6)(b)(iii) for “scientific research" substitute “ research and development (within the meaning of Part VII of that Act) ”.

Capital Allowances Act 1990 (c. 1)

7

The Capital Allowances Act 1990 is amended as follows.

8

For “scientific research", wherever occurring, substitute “ research and development ”.

9

In section 137(1)(b) after “that research" insert “ and development ”.

10

In section 139 (supplementary provisions), in subsection (1) for paragraph (a) substitute—

(a) “research and development” has the meaning given by section 837A of the principal Act and includes oil and gas exploration and appraisal;

11

In section 161 after “other than an allowance under section 136" insert “ (as that section had effect before it was repealed by the Finance Act 2000) ”.

Taxation of Chargeable Gains Act 1992 (c. 12)

12

(1) Section 195 of the Taxation of Chargeable Gains Act 1992 (allowance of certain drilling expenditure) is amended as follows.

(2) In subsections (2) and (3) for “scientific research" in each place substitute “ research and development ”.

(3) In subsection (3) after “that research" insert “ and development ”.

(4) After subsection (7) insert—

(8) In this section “research and development” has the same meaning as in Part VII of the Capital Allowances Act 1990 (allowances for research and development expenditure).

SCHEDULE 20

Part I — Entitlement to relief

Entitlement to R&D tax relief

1

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Meaning of “small or medium-sized enterprise".

2

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Qualifying R&D expenditure

3

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Relevant research and development

4

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Staffing costs

5

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Expenditure on software or consumable items

6

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Meaning of “intellectual property"

7

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Subsidised expenditure

8

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Qualifying expenditure on sub-contracted research and development

9

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Treatment of expenditure where company and sub-contractor are connected persons

10

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Election for connected persons treatment

11

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Treatment of sub-contractor payment in other cases

12

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Part II — Manner of giving effect to relief

Deduction in computing profits of trade

13

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Alternative treatment of pre-trading expenditure

14

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Entitlement to R&D tax credit

15

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Amount of credit

16

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Total amount of company’s Pay As You EarnPAYE and NICs liabilities

17

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Payment in respect of R&D tax credit

18

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Restriction on losses carried forward

19

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Payment in respect of R&D tax credit not income

20

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Part III — Supplementary provisions

Artificially inflated claims for deduction or R&D tax credit

21

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Restriction on consortium relief

22

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Treatment of deemed trading loss

23

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Funding of R&D tax credits

24

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Interpretation

25

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Transitional provisions

26

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SCHEDULE 21

Interest

1

(1) Section 826 of the Taxes Act 1988 (interest on tax overpaid) is amended as follows.

(2) In subsection (1) (payments which carry interest) after paragraph (c) insert

; or (d) a payment of R&D tax credit falls to be made to a company under Schedule 20 to the Finance Act 2000 in respect of an accounting period,

(3) After subsection (3) (material date for repayments of income tax etc.) insert—

(3A) In relation to a payment of R&D tax credit falling within subsection (1)(d) above the material date is whichever is the later of— (a) the filing date for the company’s company tax return for the accounting period for which the R&D tax credit is claimed, and (b) the date on which the company tax return or amended company tax return containing the claim for payment of the R&D tax credit is delivered to the Inland Revenue. For this purpose “the filing date”, in relation to a company tax return, has the same meaning as in Schedule 18 to the Finance Act 1998.

(4) In subsection (8A) (recovery of overpaid interest)—

(a) in paragraph (a), after “subsection (1)(a)" insert “ or (d) ”,

(b) for paragraph (b) substitute—

(b) there is— (i) a change in the company’s assessed liability to corporation tax, or (ii) a change in the amount of the R&D tax credit payable to the company (which does not result in a change falling within sub-paragraph (i)), other than a change which in whole or in part corrects an error made by the Board or an officer of the Board, and

(5) After subsection (8B) insert—

(8BA) For the purposes of subsection (8A)(b) above, the cases where there is a change in the amount of the R&D tax credit payable to the company are those cases where an assessment, or an amendment to an assessment, is made to recover an amount of R&D tax credit paid to the company for the accounting period in question.

Claim must be made in tax return

2

In Schedule 18 to the Finance Act 1998 (company tax returns, assessments and related matters), in paragraph 10 (other claims and elections to be included in return), for sub-paragraph (2) substitute—

(2) A claim to which Part VIII, IX or IXA of this Schedule applies (claims for group relief, capital allowances or R&D tax credit) can only be made by being included in a company tax return (see paragraphs 67, 79 and 83B).

Recovery of excessive R&D tax credit

3

In paragraph 52 of that Schedule (recovery of excessive repayments, etc.)—

(a) in sub-paragraph (2) (excessive repayments to which paragraphs 41 to 48 apply), before “or" at the end of paragraph (b) insert—

(ba) R&D tax credit under Schedule 20 to the Finance Act 2000,

;

and

(b) in sub-paragraph (5) (connection of assessment for excessive payment to an accounting period), before “or" at the end of paragraph (a) insert—

(ab) an amount of R&D tax credit paid to a company for an accounting period,

;

and

Claims for R&D tax credits

4

After Part IX of that Schedule (claims for capital allowances) insert—

(83A) This Part of this Schedule applies to claims for R&D tax credits under Schedule 20 to the Finance Act 2000. (83B) (1) A claim for an R&D tax credit must be made by being included in the claimant company’s company tax return for the accounting period for which the claim is made. (2) It may be included in the return originally made or by amendment. (83C) A claim for an R&D tax credit must specify the amount of the relief claimed, which must be an amount quantified at the time the claim is made. (83D) A claim for an R&D tax credit may be amended or withdrawn by the claimant company only by amending its company tax return. (83E) (1) A claim for an R&D tax credit may be made, amended or withdrawn at any time up to the first anniversary of the filing date for the company tax return of the claimant company for the accounting period for which the claim is made. (2) The claim may be made, amended or withdrawn at a later date if the Inland Revenue allow it. (83F) (1) The company is liable to a penalty where it— (a) fraudulently or negligently makes a claim for an R&D tax credit which is incorrect, or (b) discovers that a claim for an R&D tax credit made by it (neither fraudulently or negligently) is incorrect and does not remedy the error without unreasonable delay. (2) The penalty is an amount not exceeding the excess R&D tax credit claimed, that is, the difference between— (a) the amount of the R&D tax credit to which the company is entitled for the accounting period to which the claim relates, and (b) the amount of the R&D tax credit claimed by the company for that period.

SCHEDULE 22

Part I — Introductory

Tonnage tax

1

(1) This Schedule provides an alternative regime (“tonnage tax”) for calculating the profits of a shipping company for the purposes of corporation tax.

(2) The regime applies only if an election to that effect (a “tonnage tax election”) is made (see Part II of this Schedule).

Companies that are members of a group must join in a group election.

(3) A tonnage tax election may only be made if—

(a) the company or group is a qualifying company or group (see Part III of this Schedule), and

(b) certain requirements are met as to training (see Part IV of this Schedule) and other matters (see Part V of this Schedule).

Tonnage tax companies and groups

2

(1) In this Schedule a “tonnage tax company” or “tonnage tax group” means a company or group in relation to which a tonnage tax election has effect.

(2) References in this Schedule to a company entering or leaving tonnage tax are to its becoming or ceasing to be a tonnage tax company.

References to a company being subject to tonnage tax have a corresponding meaning.

Profits of tonnage tax company

3

(1) In the case of a tonnage tax company, its tonnage tax profits are brought into charge to corporation tax in place of its relevant shipping profits (see Part VI of this Schedule).

(2) Where profits would be relevant shipping income, any loss accruing to the company is similarly left out of account for the purposes of corporation tax.

Tonnage tax profits: method of calculation

4

(1) A company’s tonnage tax profits for an accounting period are calculated in accordance with this paragraph by reference to the net tonnage of the qualifying ships operated or managed by the company.

For the purposes of the calculation the net tonnage of a ship is rounded down (if necessary) to the nearest multiple of 100 tons.

(2) The calculation is as follows:

Step One

Determine the daily profit for each qualifying ship operated by the company and each qualifying ship managed by the company by reference to the following table and the net tonnage of the ship—

*Net tonnage*	*Daily Profit*	*Daily Profit*
	Operated ship	Managed ship
For each 100 tons up to 1,000 tons	£0.60	£0.12
For each 100 tons between 1,000 and 10,000 tons	£0.45	£0.09
For each 100 tons between 10,000 and 25,000 tons	£0.30	£0.06
For each 100 tons above 25,000 tons	£0.15	£0.03

Step Two

Work out the ship’s profit for the accounting period by multiplying the daily profit by—

(a) the number of days in the accounting period, or

(b) if the ship was operated by the company as a qualifying ship for only part of the period, by the number of days in that part.

Step Three

Follow Steps One and Two for each of the qualifying ships operated by the company in the accounting period.

Step Four

Add together the resulting amounts and the total is the amount of the company’s tonnage tax profits for that accounting period.

Tonnage tax profits: calculation in case of joint operation etc.

5

(1) If two or more companies fall to be regarded as operators of a ship by virtue of a joint interest in the ship, or in an agreement for the use of the ship, the tonnage tax profits of each are calculated as if each were entitled to a share of the profits proportionate to its share of that interest.

(2) If two or more companies fall to be treated as the operator of a ship otherwise than as mentioned in sub-paragraph (1), the tonnage tax profits of each are computed as if each were the only operator.

Measurement of tonnage of ship

6

(1) References in this Schedule to the gross or net tonnage of a ship are to that tonnage as determined—

(a) in the case of a vessel of 24 metres in length or over, in accordance with the IMO International Convention on Tonnage Measurement of Ships (ITC69);

(b) in the case of a vessel under 24 metres in length, in accordance with tonnage regulations.

(2) A ship shall not be treated as a qualifying ship for the purposes of this Schedule unless there is in force—

(a) a valid International Tonnage Certificate (1969), or

(b) a valid certificate recording its tonnage as measured in accordance with tonnage regulations.

(3) In this paragraph “tonnage regulations” means regulations under section 19 of the Merchant Shipping Act 1995 or provisions of the law of a country or territory outside the United Kingdom corresponding to those regulations.

Part II — Tonnage tax elections

Company or group election

7

(1) A tonnage tax election may be made in respect of—

(a) a qualifying single company (a “company election”), or

(b) a qualifying group (a “group election”).

(2) A group election has effect in relation to all qualifying companies in the group.

Method of making election

8

(1) A tonnage tax election is made by notice to the Inland Revenue.

(2) The notice must contain such particulars and be supported by such evidence as the Inland Revenue may require.

Person by whom election to be made

9

(1) A company election must be made by the company concerned.

(2) A group election must be made jointly by all the qualifying companies in the group.

When election may be made

10

(1) A tonnage tax election may be made at any time before the end of the period of twelve months beginning with the day on which this Act is passed (“the initial period”).

After the end of the initial period a tonnage tax election may only be made—

(a) in the circumstances specified in the following provisions of this paragraph, or

(b) as provided by an order under paragraph 11 (power to provide further opportunities for election).

(2) An election may be made after the end of the initial period in respect of a single company that—

(a) becomes a qualifying company, and

(b) has not previously been a qualifying company at any time after the passing of this Act.

Any such election must be made before the end of the period of twelve months beginning with the day on which the company became a qualifying company , subject to sub-paragraph (3A).

(3) An election may be made after the end of the initial period in respect of a group that becomes a qualifying group by virtue of a member of the group becoming a qualifying company, not previously having been a qualifying company at any time after the passing of this Act.

This does not apply if the group—

(a) was previously a qualifying group at any time after the passing of this Act, or

(b) is substantially the same as a group that was previously a qualifying group at any such time.

An election under this sub-paragraph must be made before the end of the period of twelve months beginning with the day on which the group became a qualifying group , subject to sub-paragraph (3A).

(3A) An election under sub-paragraph (2) or (3) may be made after the end of the period specified in that sub-paragraph with the consent of an officer of Revenue and Customs.

(3B) An officer of Revenue and Customs may not give consent for the purposes of sub-paragraph (3A) unless satisfied that—

(a) there was a reasonable excuse for the failure to make the election before the end of the period specified in sub-paragraph (2) or (3) (as appropriate), and

(b) after the end of that period, the consent was requested without delay or there is a reasonable excuse for any further delay.

(4) This paragraph does not prevent an election being made under the provisions of Part XII of this Schedule relating to mergers and demergers.

Power to provide further opportunities for election

11

(1) The Treasury may by order provide for further periods during which tonnage tax elections may be made.

(2) Any such order may provide for this Part of this Schedule to apply, with such consequential adaptations as appear to the Treasury to be appropriate, in relation to any such further period as it applies in relation to the initial period.

The consequential adaptations that may be made include adaptations of the references to the passing of this Act or to 1st January 2000.

When election takes effect

12

(1) The general rule is that a tonnage tax election has effect from the beginning of the accounting period in which it is made.

This is subject to the following exceptions.

(2) A tonnage tax election cannot have effect in relation to an accounting period beginning before 1st January 2000.

If the general rule would produce that effect, the election has effect instead from the beginning of the accounting period following that in which it is made.

(3) The Inland Revenue may agree that a tonnage tax election made before the end of the initial period shall have effect from the beginning of an accounting period earlier than that in which it is made (but not one beginning before 1st January 2000).

(4) The Inland Revenue may agree that a tonnage tax election made before the end of the initial period shall have effect from the beginning of the accounting period following that in which it is made.

In exceptional circumstances they may agree that it shall have effect from the beginning of the accounting period following that one.

(5) In the case of a group election in respect of a group where the members have different accounting periods—

(a) sub-paragraph (1), or

(b) any agreement under sub-paragraph (3) or (4),

has effect in relation to each qualifying company by reference to that company’s accounting periods.

(6) A tonnage tax election under paragraph 10(2) or (3) (election in consequence of company becoming a qualifying company) has effect from the time at which the company in question became a qualifying company.

This is subject to paragraph 38(2)(a) and (b) (effect in certain cases of exceeding the 75% limit on chartered in tonnage).

Period for which election is in force

13

(1) The general rule is that a tonnage tax election remains in force until it expires at the end of the period of the relevant number of years beginning—

(a) in the case of a company election, with the first day on which the election has effect in relation to the company;

(b) in the case of a group election, with the first day on which the election has effect in relation to any member of the group.

...

(1A) “The relevant number of years” means—

(a) in relation to a tonnage tax election made before 1 April 2022, ten years;

(b) in relation to a tonnage tax election made on or after 1 April 2022, eight years.

(1B) Sub-paragraph (1) is subject to the following exceptions.

(2) A tonnage tax election ceases to be in force—

(a) in the case of a company election, if the company ceases to be a qualifying company;

(b) in the case of a group election, if the group ceases to be a qualifying group.

(2A) A tonnage tax election ceases to be in force—

(a) in the case of a company election, if a withdrawal notice in respect of the company takes effect under paragraph 15A;

(b) in the case of a group election, if a withdrawal notice in respect of the group takes effect under that paragraph.

(3) A tonnage tax election may also cease to be in force under—

(a) the provisions of Part V of this Schedule, or

(b) the provisions of Part XII of this Schedule relating to mergers and demergers.

(4) This paragraph has effect subject to paragraph 15(4) (election superseded by renewal election).

Effect of election ceasing to be in force

14

A tonnage tax election that ceases to be in force ceases to have effect in relation to any company.

Renewal election

15

(1) A further tonnage tax election (a “renewal election”) may be made in respect of a single company or group if—

(a) at the time it is made, a tonnage tax election is in force in respect of the company or group, or

(b) it is a bridging renewal election (see paragraph 15ZA).

(2) This is subject to paragraph 32(5) (training requirement: no renewal election if non-compliance notice in force).

(3) The provisions of—

paragraphs 7 to 9 (type of election, method of election and person by whom election to be made), and

paragraphs 13 and 14 (period for which election is in force and when election ceases to have effect),

apply in relation to a renewal election as they apply in relation to an original tonnage tax election.

(4) A renewal election supersedes the existing tonnage tax election.

Part III — Qualifying companies and groups

Qualifying companies and groups

16

(1) For the purposes of this Schedule a company is a “qualifying company” if—

(a) it is within the charge to corporation tax,

(b) it operates or manages qualifying ships, and

(2) A “qualifying group” means a group of which one or more members are qualifying companies.

Effect of temporarily ceasing to operate qualifying ships

17

(1) This paragraph applies where a company temporarily ceases to operate or manage any qualifying ships.

It does not apply where a company continues to operate or manage a ship that temporarily ceases to be a qualifying ship.

(2) If the company gives notice to the Inland Revenue stating—

(a) its intention to resume operating or managing qualifying ships, and

(b) its wish to remain within tonnage tax,

the company shall be treated for the purposes of this Schedule as if it had continued to operate or manage the qualifying ship or ships it operated or managed immediately before the temporary cessation.

(3) The notice must be given not later than the date which is the filing date for the company’s company tax return for the accounting period in which the temporary cessation begins.

(4) This paragraph ceases to apply if and when the company—

(a) abandons its intention to resume operating or managing qualifying ships, or

(b) again in fact operates or manages a qualifying ship.

Meaning of operating a ship

18

(1) A company is regarded for the purposes of this Schedule as operating any ship owned by, or chartered to, the company, subject to the following provisions.

(2) A company is not regarded as the operator of a ship where part only of the ship has been chartered to it.

For this purpose a company is not to be taken as having part only of a ship chartered to it by reason only of the ship being chartered to it jointly with one or more other persons.

(3) A company is not regarded as the operator of a ship that has been chartered out by it on bareboat charter terms, except as provided by the following provisions.

(4) A company is regarded as operating a ship that has been chartered out by it on bareboat charter terms if the person to whom it is chartered is not a third party.

For this purpose a “third party” means—

(a) in the case of a single company, any other person;

(b) in the case of a member of a group—

(i) any member of the group that is not a tonnage tax company (and does not become a tonnage tax company by virtue of the ship being chartered to it), or

(ii) any person who is not a member of the group.

(5) A company is not regarded as ceasing to operate a ship that has been chartered out by it on bareboat charter terms if—

(a) the ship is chartered out because of short-term over-capacity, and

(b) the term of the charter does not exceed three years.

(6) A company is regarded as operating a ship that has been chartered out by it on bareboat charter terms if the ship—

(a) is registered in the United Kingdom, and

(b) is in the service of a government department by reason of a charter by demise to the Crown,

and there is in force under section 308(2) of the Merchant Shipping Act 1995 an Order in Council providing for the registration of government ships in the service of that department.

In this sub-paragraph “government department” includes a Northern Ireland department.

Qualifying ships

19

(1) For the purposes of this Schedule a “qualifying ship” means, subject to sub-paragraph (2), a seagoing ship of 100 tons or more gross tonnage used for—

(a) the carriage by sea of passengers,

(b) the carriage by sea of cargo,

(d) transport by sea in connection with other services of a kind necessarily provided at sea.

(2) A vessel is not a qualifying ship for the purposes of this Schedule if the main purpose for which it is used is the provision of goods or services of a kind normally provided on land.

(3) Sub-paragraph (1) is also subject to

(a) paragraph 20 (vessels excluded from being qualifying ships);

(b) paragraph 20A (qualifying dredgers and tugs);

(4) For the purposes of this paragraph a ship is a seagoing ship if it is certificated for navigation at sea by the competent authority of any country or territory.

(5) For the purposes of sub-paragraph (1) “sea” does not include—

(a) a port or harbour;

(b) an estuary, a tidal or other river or an inland waterway.

Vessels excluded from being qualifying ships

20

(1) The following kinds of vessel are not qualifying ships for the purposes of this Schedule—

(a) fishing vessels or factory ships;

(b) pleasure craft;

(d) offshore installations;

(e) tankers dedicated to a particular oil field;

(f) dredgers other than qualifying dredgers.

(2) In sub-paragraph (1)(a) “factory ship” means a vessel providing processing services for the fishing industry.

(3) In sub-paragraph (1)(b) “pleasure craft” means a vessel of a kind whose primary use is for the purposes of sport or recreation.

(4) In sub-paragraph (1)(c) “harbour or river ferry” means a vessel used for harbour, estuary or river crossings.

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) For the purposes of sub-paragraph (1)(e) whether a tanker is dedicated to a particular oil field shall be determined in accordance with section 2 of the Oil Taxation Act 1983 (dedicated mobile assets).

(7) In this Schedule “qualifying dredger” means a dredger which—

(a) is self-propelled, and

(b) is constructed or adapted for the carriage of cargo;

(but see further paragraph 20A).

Power to modify exclusions

21

The Treasury may make provision by order amending paragraph 20 so as to add any description of vessel to, or remove any description of vessel from, the kinds of vessel that are excluded from being qualifying ships for the purposes of this Schedule.

Effect of change of use

22

(1) A qualifying ship that begins to be used for non-qualifying purposes ceases to be a qualifying ship when it begins to be so used, subject to the following provisions.

(2) If—

(a) a company operates a ship throughout an accounting period of the company, and

(b) in that period the ship is used for non-qualifying purposes on not more than 30 days,

that use shall be disregarded in determining whether the ship is a qualifying ship at any time during that period.

(3) In the case of an accounting period shorter than a year, the figure of 30 days in sub-paragraph (2) shall be proportionately reduced.

(4) If a company operates a ship during part only of an accounting period of the company, sub-paragraph (2) has effect as if for “30 days", or the number of days substituted by sub-paragraph (3), there were substituted the number of days that bear to the length of that part of the accounting period the same proportion that 30 days does to a year.

(5) In this paragraph references to use for non-qualifying purposes are to—

(a) use for an activity other than any of the activities mentioned in paragraph 19(1)(a) to (d), or

(b) use as a vessel of a kind excluded by paragraph 20 from being a qualifying ship.

(6) This paragraph does not apply for the purposes of sub-paragraphs (2) to (5) of paragraph 20A (qualifying dredgers and tugs).

Part IV — The training requirement

Introduction

23

(1) It is a condition of entering tonnage tax or making a renewal election that—

(a) in the case of a single company, the company, or

(b) in the case of a group, the group,

meets certain minimum obligations in connection with the training of seafarers.

(2) The provisions of this Part of this Schedule have effect for securing that result.

(3) The condition mentioned in sub-paragraph (1) does not apply to—

(a) a company that does not operate any qualifying ships, or

(b) a group that does not have any members that operate one or more qualifying ships.

The minimum training obligation

24

(1) The Secretary of State may make provision by regulations as to the minimum obligation of a tonnage tax company as regards the training of seafarers.

(2) The regulations may—

(a) require the company to provide training for a minimum number of seafarers calculated on such basis as may be prescribed, and

(b) impose different requirements with respect to the training of officers and ratings.

Paragraph (b) is without prejudice to the general power to make different provision for different cases (see paragraph 36(2)(a)).

(3) The regulations may impose such requirements as to the nationality and ordinary residence of trainees as appear to the Secretary of State to be appropriate.

(4) References in this Part of this Schedule to “the minimum training obligation" are—

(a) in relation to a single company, to the minimum obligation of that company, and

(b) in relation to a group, to the minimum obligations of the qualifying companies in the group taken as a whole.

Meaning of “training commitment"

25

(1) References in this Part of this Schedule to a “training commitment" are to a statement by a company or group setting out how it proposes to meet the minimum training obligation.

(2) A training commitment is not effective for the purposes of this Part of this Schedule unless approved by the Secretary of State.

(3) Sub-paragraphs (1) and (2) are subject to—

paragraph 27(4) and (5) (power of Secretary of State to set training commitment), and

paragraph 28(2) (power of Secretary of State to adjust training commitment to take account of changed circumstances).

Approval of initial training commitment

26

(1) A company or group proposing to make a tonnage tax election must produce, and submit to the Secretary of State for approval, an initial training commitment.

(2) If the Secretary of State is satisfied that the proposals are adequate to meet the minimum training obligation, he shall approve the initial training commitment and issue a certificate to that effect.

(3) A tonnage tax election is ineffective unless such a certificate of approval is in force with respect to the training commitment of the company or group in respect of which the election is made.

Annual training commitment

27

(1) The Secretary of State may by regulations require a tonnage tax company or tonnage tax group—

(a) to produce a training commitment at such annual or other intervals as may be prescribed in respect of such period as may be prescribed, and

(b) to submit it to the Secretary of State for approval.

(2) If the Secretary of State is satisfied that the proposals are adequate to meet the minimum training obligation, he shall approve the training commitment and issue a certificate to that effect.

(3) It is an offence to fail to comply with any requirement imposed by regulations under sub-paragraph (1).

(4) The Secretary of State may make provision by regulations enabling him—

(a) to set the training commitment for a company or group if, after such period as may be prescribed, no training commitment has been submitted to and approved by him; and

(b) on the application of the company or group concerned, made after consultation with any prescribed person involved in the training of seafarers, to vary a training commitment set by him.

(5) A training commitment set by the Secretary of State has effect as if submitted by the company or group and approved by him.

Supplementary provisions about training commitments

28

(1) The Secretary of State may make provision by regulations—

(a) as to the form and contents of a training commitment;

(b) requiring an application for approval of a training commitment to be in such form and contain such information as may be prescribed;

(c) authorising the Secretary of State, when considering a training commitment, to consult any prescribed person involved in the training of seafarers;

(d) as to the procedure to be followed where the Secretary of State is minded not to approve a training commitment.

(2) The Secretary of State may make provision by regulations—

(a) enabling him, on the application of the company or group concerned, to adjust a training commitment (to any extent) to take account of changed circumstances;

(b) requiring an application for adjustment to be in such form and contain such information as may be prescribed;

(c) authorising the Secretary of State, when considering an application for adjustment, to consult any prescribed person involved in the training of seafarers;

(d) as to the procedure to be followed where the Secretary of State is minded not to make the adjustment applied for.

(3) The Secretary of State may by regulations make such provision as he thinks appropriate as to the effect in relation to a training commitment of a merger or other transaction resulting in a change of control of one or more companies.

Payments in lieu of training

29

(1) The Secretary of State may make provision by regulations—

(a) allowing a company or group, in such circumstances and to such extent as may be prescribed, to propose in its training commitment to meet the minimum training obligation by making payments in lieu of training; and

(b) requiring a company or group to make payments in lieu of training—

(i) where its training commitment provides for such payments;

(ii) where training is not provided in accordance with its training commitment.

(2) The regulations shall provide for payments in lieu of training—

(a) to be calculated on such basis as may be prescribed,

(b) to be made to or for the benefit of any prescribed person involved in the training of seafarers, and

(3) The regulations may provide that if in any case there is a failure in relation to a company or group to comply with the requirements of this Part of this Schedule with respect to—

(a) the submission of training commitments, or

(b) the making of returns or provision of information,

the Secretary of State may determine to the best of his information and belief the amount of the payments in lieu of training to be made by the company or group.

(4) The regulations may provide that a payment in lieu of training that has become due but is unpaid—

(a) is a debt due to the Secretary of State or any prescribed person involved in the training of seafarers, and

(b) carries interest at such rate as may be prescribed.

(5) The regulations may provide for the costs or expenses of any legal or other proceedings for recovering the debt or interest to be recoverable, and to carry interest, in the same way as the debt.

Monitoring of compliance with training commitment

30

(1) The Secretary of State may make provision by regulations—

(a) requiring a return to be made to the Secretary of State or any prescribed person involved in the training of seafarers, at such intervals as may be prescribed, of such information as may be prescribed relating to—

(i) the training provided, and

(ii) any payments in lieu of training made,

by a tonnage tax company or tonnage tax group;

(b) authorising the Secretary of State to direct any person to provide such information as the Secretary of State may reasonably require for the purposes of ascertaining—

(i) what the minimum training obligation of a company or group should be,

(ii) whether the proposals in a training commitment are adequate to meet the minimum training obligation of a company or group, or

(iii) whether a company or group has complied with its training commitment;

(i) of a qualifying single company, or

(ii) of the qualifying companies in a group,

for the purpose of checking that any return or information provided to the Secretary of State is correct.

(2) A person commits an offence if without reasonable excuse—

(a) he fails to make a return that he is required to make by regulations under sub-paragraph (1)(a),

(b) having been directed under regulations under sub-paragraph (1)(b) to provide any information, he fails to comply with the direction, or

Higher rate of payment in case of failure to meet training commitment

31

(1) The Secretary of State may by regulations provide that—

(a) if a company fails to meet its training commitment in any period, the amount of any payments in lieu of training that fall to be made by the company in a subsequent period shall be at a higher rate; and

(b) if a group fails to meet its training commitment in any period, the amount of any payments in lieu of training that fall to be made by any member of the group in a subsequent period shall be at a higher rate.

(2) The regulations may contain provision as to—

(a) the periods by reference to which it is to be determined whether a company or group has met its training commitment;

(b) the circumstances in which a company or group is to be treated as failing to meet its training commitment;

(d) any circumstances in which the higher rate is not to be payable despite the failure of a company or group to meet its training commitment.

(3) The regulations may make provision having the effect that the rate of payments in lieu of training is progressively increased if a company or group fails to meet its training commitment in successive periods.

Certificate of non-compliance

32

(1) The Secretary of State may by regulations make provision authorising the Secretary of State to issue a certificate of non-compliance in the following cases.

(2) The regulations may authorise the issue of a certificate of non-compliance in respect of a single company if—

(a) the company fails to meet its training commitment for successive periods amounting to not less than two years, or

(b) the company, or any of its officers, commits an offence under this Schedule.

(3) The regulations may authorise the issue of a certificate of non-compliance in respect of a group if—

(a) the group fails to meet its training commitment for successive periods amounting to not less than two years, or

(b) a member of the group, or an officer of a member, commits an offence under this Schedule.

(4) If such regulations are made they shall provide that a certificate of non-compliance must be issued unless the Secretary of State is satisfied that there are good reasons why a certificate should not be issued.

(5) No renewal election may be made in respect of a company or group in relation to which a certificate of non-compliance is in force.

Certificates of non-compliance: supplementary provisions

33

(1) The Secretary of State may make provision by regulations—

(a) enabling a company or group in respect of which a certificate of non-compliance has been issued to apply to the Secretary of State to cancel the certificate;

(b) requiring any such application to be in such form and contain such information as may be prescribed;

(c) authorising or requiring the Secretary of State, when considering such an application, to consult any prescribed person involved in the training of seafarers;

(d) as to the procedure to be followed where the Secretary of State is minded not to cancel a certificate of non-compliance.

(2) The Secretary of State may by regulations make such provision as he thinks appropriate as to the effect on a certificate of non-compliance of a merger or demerger relating to the company or group in respect of which the certificate is in force.

Disclosure of information

34

(1) No obligation as to secrecy or other restriction on the disclosure of information imposed by statute or otherwise prevents the disclosure of information—

(a) by the Secretary of State to the Inland Revenue for the purpose of assisting the Inland Revenue to discharge their functions under the Corporation Tax Acts so far as relating to matters arising under this Schedule, or

(b) by the Inland Revenue to the Secretary of State for the purpose of assisting the Secretary of State to discharge his functions under this Part of this Schedule.

(2) No obligation as to secrecy or other restriction on the disclosure of information imposed by statute or otherwise prevents the disclosure of information—

(a) by the Secretary of State to any prescribed person involved in the training of seafarers, or

(b) by any such person to the Secretary of State,

for the purposes of assisting the Secretary of State to discharge his functions under this Part of this Schedule.

(3) Information obtained by such disclosure as is mentioned in sub-paragraph (1) or (2) shall not be further disclosed except for the purposes of legal proceedings arising out of the functions referred to.

Offences

35

(1) It is an offence for a person to provide for any of the purposes of this Part of this Schedule information that he knows or has reasonable cause to believe is false in a material particular.

(2) A person committing any offence under this Part of this Schedule, is liable—

(a) on summary conviction, to a fine not exceeding the statutory maximum, and

(b) on conviction on indictment, to a fine.

General provisions about regulations

36

(1) Regulations under this Part of this Schedule shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of the House of Commons.

(2) Regulations under this Part of this Schedule—

(a) may make different provision for different cases, and

(b) may contain such supplementary, incidental and transitional provisions as appear to the Secretary of State to be necessary or expedient.

(3) In this Part of this Schedule “prescribed” means prescribed by regulations made by the Secretary of State.

(4) Regulations under this Part of this Schedule may make provision as to the obligations of a company in respect of any part of the period—

(a) beginning with 1st January 2000, and

(b) ending immediately before the first regulations under this Part come into force,

during which the company is, or is treated as having been, subject to tonnage tax.

This includes power to require payments in lieu of training to be made in respect of any such part of that period.

Part V — Other requirements

The requirement that not more than 75% of fleet tonnage is chartered in

37

(1) It is a requirement of a relevant company or group entering or remaining within tonnage tax—

(a) in the case of a single company, that not more than 75% of the net tonnage of the qualifying ships operated by it is chartered in;

(b) in the case of a group, that not more than 75% of the aggregate net tonnage of the qualifying ships operated by the members of the group that are qualifying companies is chartered in.

(2) For this purpose a ship is “chartered in"—

(a) in relation to a single company, if it is chartered to the company otherwise than on bareboat charter terms, or

(b) in relation to a group, if it is chartered otherwise than on bareboat charter terms to a qualifying member of the group by a person who is not a qualifying member of the group.

In paragraph (b) “qualifying member of the group” means a qualifying company that is a member of the group.

(3) A ship shall not be counted more than once in determining for the purposes of sub-paragraph (1)(b) the aggregate net tonnage of the qualifying ships operated by the members of a group that are qualifying companies.

(4) In the following provisions the requirement in this paragraph is referred to as “the 75% limit"—

paragraph 38 (election not effective if limit exceeded), and

paragraphs 39 and 40 (exclusion of company or group where limit exceeded).

(5) References to the limit being exceeded in an accounting period are to its being exceeded on average over the period in question.

(6) For the purposes of sub-paragraph (1)—

(a) a company is “relevant” if it operates one or more qualifying ships, and

(b) a group is “relevant” if it has one or more members that operate one or more qualifying ships.

The 75% limit: election not effective if limit exceeded

38

(1) Where a tonnage tax election is made before the end of the initial period and the 75% limit is exceeded in the first relevant accounting period, the election is treated as never having been of any effect.

(2) Where a tonnage tax election is made after the end of the initial period, then—

(a) if the 75% limit is exceeded in the first relevant accounting period, the election does not have effect in relation to that period;

(b) if the 75% limit is exceeded in the first and second relevant accounting periods, the election does not have effect in relation to either of those periods; and

(c) if the 75% limit is exceeded in the first, second and third relevant accounting periods, the election is treated as never having been of any effect.

(3) For the purposes of sub-paragraphs (1) and (2) the first, second or third relevant accounting period means—

(a) in relation to a single company, the accounting period that, if the election had been effective, would have been the first, second or third accounting period of the company after its entry into tonnage tax;

(b) in relation to a group, the accounting period that, if the election had been effective, would have been the first, second or third accounting period of a member of the group that would have been a tonnage tax company.

(4) Sub-paragraphs (1) and (2) do not apply to a renewal election.

The 75% limit: exclusion of company if limit exceeded

39

(1) If the 75% limit is exceeded in two or more consecutive accounting periods of a single company subject to tonnage tax, the Inland Revenue may give notice excluding the company from tonnage tax.

(2) The effect of the notice is that the company’s tonnage tax election ceases to be in force from such date as may be specified in the notice.

The specified date must not be earlier than the beginning of the accounting period of the company that follows the second consecutive accounting period of the company in which the limit is exceeded.

The 75% limit: exclusion of group if limit exceeded

40

(1) If the 75% limit is exceeded in relation to a tonnage tax group in two or more consecutive accounting periods of any tonnage tax company that is a member of the group (“the relevant company”), the Inland Revenue may give notice excluding the group from tonnage tax.

(2) The effect of the notice is that the group’s tonnage tax election ceases to be in force from such date as may be specified in the notice.

The specified date must not be earlier than the beginning of the accounting period of the relevant company that follows the second consecutive accounting period of that company in which the limit is exceeded.

(3) Notice under this paragraph need only be given to the relevant company.

This is subject to any arrangements under paragraph 120 (arrangements for dealing with group matters).

The requirement not to enter into tax avoidance arrangements

41

(1) It is a condition of remaining within tonnage tax that a company is not a party to any transaction or arrangement that is an abuse of the tonnage tax regime.

(2) A transaction or arrangement is such an abuse if in consequence of its being, or having been, entered into the provisions of this Schedule fall to be applied in a way that results (or would but for this paragraph result) in—

(a) a tax advantage being obtained for—

(i) a company other than a tonnage tax company, or

(ii) a tonnage tax company in respect of its non-tonnage tax activities,

(b) the amount of the tonnage tax profits of a tonnage tax company being artificially reduced.

(3) In this paragraph “tax advantage” has the meaning given by section 840ZA of the Taxes Act 1988.

(4) A ... lease is not to be taken as being an abuse of the tonnage tax regime by reason of the lessor obtaining capital allowances as a result of the lease being, or having been, entered into.

In this sub-paragraph “lease”, and “lessor” in relation to a lease, have the meaning given by paragraph 89(2).

Tax avoidance: exclusion from tonnage tax

42

(1) If a tonnage tax company is a party to any such transaction or arrangement as is mentioned in paragraph 41(1), the Inland Revenue may—

(a) if it is a single company, give notice excluding it from tonnage tax;

(b) if it is a member of a group, give notice excluding the group from tonnage tax.

(2) The effect of the notice in the case of a single company is that the company’s tonnage tax election ceases to be in force from the beginning of the accounting period in which the transaction or arrangement was entered into.

(3) The effect of such a notice in the case of a group is that the group’s tonnage tax election ceases to be in force from such date as may be specified in the notice.

The specified date must not be earlier than the beginning of the earliest accounting period in which any member of the group entered into the transaction or arrangement in question.

(4) The provisions of paragraphs 138 and 139 (exit charge: chargeable gains and balancing charges) apply where a company ceases to be a tonnage tax company by virtue of this paragraph.

(5) Notice under this sub-paragraph (1)(b) need only be given to the company mentioned in the opening words of that sub-paragraph.

This is subject to any arrangements under paragraph 120 (arrangements for dealing with group matters).

Appeals

43

(1) An appeal may be made against a notice given by the Inland Revenue under—

paragraph 39 or 40 (exclusion of company or group from tonnage tax if 75% limit exceeded), or

paragraph 42 (exclusion from tonnage tax of company or group where tax avoidance arrangement entered into).

(2) Notice of appeal must be given to the Inland Revenue within 30 days of the date of issue of the notice appealed against.

(3) In the case of a notice under paragraph 40 or 42(1)(b) only one appeal may be brought, but it may be brought jointly by two or more members of the group concerned.

Part VI — Relevant shipping profits

Introduction

44

(1) For the purposes of this Schedule the relevant shipping profits of a tonnage tax company are—

(a) its relevant shipping income (as defined below), and

(b) so much of its chargeable gains as is effectively excluded from the charge to tax by the provisions of Part VIII of this Schedule.

(2) The “relevant shipping income” of a tonnage tax company means—

(a) its income from tonnage tax activities (see paragraphs 45 to 48), and

(b) any income that is relevant shipping income under—

paragraph 49 (distributions of overseas shipping companies), or

paragraph 50 (certain interest etc.),

but subject to paragraph 51 (general exclusion of investment income).

Tonnage tax activities

45

(1) References in this Schedule to the “tonnage tax activities" of a tonnage tax company are to—

(a) its core qualifying activities (see paragraph 46),

(b) its qualifying secondary activities to the extent that they do not exceed the permitted level (see paragraph 47), and

(2) Sub-paragraph (1) has effect subject to paragraph 51(2) (exclusion of activities giving rise to investment income).

Core qualifying activities

46

(1) A tonnage tax company’s “core qualifying activities" are—

(a) its activities in operating or managing qualifying ships, and

(b) other ship-related activities that are a necessary and integral part of the business of operating or managing its qualifying ships.

(2) A company’s activities in operating qualifying ships means the activities mentioned in paragraph 19(1)(a) to (d) by virtue of which the ship is a qualifying ship.

(3) A company’s activities in managing qualifying ships means its participation in the activities mentioned in that paragraph by virtue of which the ship is a qualifying ship.

Qualifying secondary activities

47

(1) The Inland Revenue may make provision by regulations as to—

(a) the descriptions of activity that are to be regarded as qualifying secondary activities, and

(b) the permitted level in relation to any such activity or description of activity.

(2) The regulations may set the permitted level or provide for its determination by reference to such factors as may be specified in the regulations.

Qualifying incidental activities

48

(1) A company’s incidental activities means its ship-related activities that—

(a) are incidental to its core qualifying activities, and

(b) are not qualifying secondary activities.

(2) If the turnover in an accounting period of the company from its incidental activities (taken together) does not exceed 0.25% of the company’s turnover in that period from—

(a) its core qualifying activities, and

(b) its qualifying secondary activities to the extent that they do not exceed the permitted level,

the company’s incidental activities in that period are qualifying incidental activities.

Relevant shipping income: distributions of overseas shipping companies

49

(1) Income of a tonnage tax company consisting in a dividend or other distribution of an overseas company is relevant shipping income if the following conditions are met.

(2) The conditions are—

(a) that the overseas company operates qualifying ships;

(b) that more than 50% of the voting power in the overseas company is held by a company resident in a the United Kingdom ..., or that two or more companies each of which is resident in a the United Kingdom ... hold in aggregate more than 50% of that voting power;

(c) that , where the overseas company operates qualifying ships, the 75% limit is not exceeded in relation to the overseas company in any accounting period in respect of which the distribution is paid;

(d) that all the income of the overseas company is such that, if it were a tonnage tax company, it would be relevant shipping income;

(e) that the distribution is paid entirely out of profits arising at a time when—

(i) the conditions in paragraphs (a) to (d) were met, and

(ii) the tonnage tax company was subject to tonnage tax; and

(f) the profits of the overseas company out of which the distribution is paid are subject to a tax on profits (in the country of residence of the company or elsewhere, or partly in that country and partly elsewhere).

(3) For the purposes of sub-paragraph (2)(c) the “75% limit” is the requirement set out in paragraph 37 (requirement that not more than 75% of tonnage is chartered in) as it applies to a single company.

(4) In this paragraph an “overseas company” means a company that is not resident in the United Kingdom.

Relevant shipping income: certain interest etc.

50

(1) Income to which this paragraph applies is relevant shipping income only to the extent that it would apart from this Schedule fall to be taken into account as trading income from a trade consisting of the company’s tonnage tax activities.

(2) This paragraph applies to—

(a) anything giving rise to a credit that would fall to be brought into account for the purposes of Part 5 of the Corporation Tax Act 2009 (loan relationships); and

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c) any credit falling to be brought into account in accordance with Part 7 of the Corporation Tax Act 2009 (derivative contracts).

General exclusion of investment income

51

(1) Income from investments is not relevant shipping income.

(2) To the extent that an activity gives rise to income from investments it is not regarded as part of a company’s tonnage tax activities.

(3) For the purposes of this paragraph “income from investments” includes anything chargeable to tax under—

(a) Part 4 of the Corporation Tax Act 2009 (property income),

(b) section 299 of that Act (loan relationships: non-trading profits),

(d) Chapter 7 of Part 10 of that Act (annual payments not otherwise charged) , or

(e) regulation 15 of the Unauthorised Unit Trusts (Tax) Regulations 2013.

(5) Sub-paragraph (1) above does not affect income that is relevant shipping income under—

paragraph 49 (distributions of overseas shipping companies), or

paragraph 50 (certain interest etc.).

Part VII — The ring fence: general provisions

Accounting period ends on entry or exit

52

An accounting period ends (if it would not otherwise do so) when a company enters or leaves tonnage tax.

Tonnage tax trade

53

(1) The tonnage tax activities of a tonnage tax company are treated for corporation tax purposes as a separate trade (the company’s “tonnage tax trade”) distinct from all other activities carried on by the company.

(2) Sub-paragraph (1) shall not be read as requiring a company to be treated—

(a) as setting up and commencing a new trade on entry into tonnage tax, or

(b) as permanently ceasing to carry on a trade on leaving tonnage tax.

Profits of controlled foreign companies

54

(1) A tonnage tax company is not subject to any liability at step 5 in section 371BC(1) of the Taxation (International and Other Provisions) Act 2010 (“TIOPA 2010”) in any accounting period in respect of profits of a CFC if in that period distributions of the CFC made to the tonnage tax company would be relevant shipping income of the latter (see paragraph 49); and, accordingly, the tonnage tax company is not to be a chargeable company for the purposes of Part 9A of TIOPA 2010 in relation to the CFC's accounting period in question.

(2) In relation to a CFC which—

(a) is a member of a tonnage tax group, and

(b) is a tonnage tax company by virtue of the group's tonnage tax election, or would be if it were within the charge to corporation tax,

the corporation tax assumptions within the meaning of Part 9A of TIOPA 2010 are to be taken to include the following assumption.

(3) The CFC is to be assumed to be a single company that is a tonnage tax company.

(4) Nothing in section 371SL(1) of TIOPA 2010 affects sub-paragraphs (2) and (3) above.

(5) In this paragraph “CFC” has the same meaning as in Part 9A of TIOPA 2010.

General exclusion of reliefs, deductions and set-offs

55

No relief, deduction or set-off of any description is allowed against the amount of a company’s tonnage tax profits.

Exclusion of loss relief

56

(1) When a company enters tonnage tax, any losses that have accrued to it before entry and are attributable—

(a) to activities that under tonnage tax become part of the company’s tonnage tax trade, or

(b) to a source of income that under tonnage tax becomes relevant shipping income,

are not available for loss relief in any accounting period beginning on or after the company’s entry into tonnage tax.

(2) Any apportionment necessary to determine the losses so attributable shall be made on a just and reasonable basis.

(3) In sub-paragraph (1) “loss relief” includes any means by which a loss might be used to reduce the amount in respect of which that company, or any other company, is chargeable to tax.

Exclusion of relief or set-off against tax liability

57

(1) Any relief or set-off against a company’s tax liability for an accounting period does not apply in relation to—

(a) so much of that tax liability as is attributable to the company’s tonnage tax profits, or

(b) so much of that tax liability as is attributable to tonnage profits of a CFC apportioned to the company at step 3 in section 371BC(1) of the Taxation (International and Other Provisions) Act 2010.

(2) Relief to which this paragraph applies includes, but is not limited to, any relief or set-off under—

(a) sections 2 and 6 of the Taxation (International and Other Provisions) Act 2010 (double taxation relief by agreement with territories outside the United Kingdom),

(aa) section 18(1)(b) and (2) of that Act (unilateral relief from double taxation), or

(b) regulations under section 32 of the Finance Act 1998 (unrelieved surplus advance corporation tax).

(3) Sub-paragraph (1)(b) applies whether or not the company to which the profits are apportioned is subject to tonnage tax.

(4) For the purposes of sub-paragraph (1)(b)—

(a) “tonnage profits” means so much of the CFC's chargeable profits for its accounting period in question as, applying the corporation tax assumptions, are calculated in accordance with paragraph 4 of this Schedule; and

(b) so much of those chargeable profits as are tonnage profits shall be treated as apportioned at step 3 in section 371BC(1) of the Taxation (International and Other Provisions) Act 2010 in the same proportions as those profits (taken generally) are apportioned.

(4A) In sub-paragraphs (1)(b) and (4) terms defined in Part 9A of the Taxation (International and Other Provisions) Act 2010 have the same meaning as in that Part.

(5) For the purposes of any such regulations as are mentioned in sub-paragraph (2)(b), a company’s tonnage tax profits shall be left out of account in determining the company’s profits charged to corporation tax.

This does not affect the computation under those regulations of shadow ACT on distributions made by a tonnage tax company, whether paid out of tonnage tax profits or other profits.

(6) This paragraph does not affect—

(a) any reduction under Part 3A or Chapter 3A of Part 8 of the Corporation Tax Act 2010 (marginal relief for companies with small profits), or

(b) any set off under section 967 or 968 of the Corporation Tax Act 2010 (set off for income tax borne by deduction).

Transactions not at arm’s length: between tonnage tax company and another person

58

(1) In relation to provision made or imposed as between a tonnage tax company and another person by a transaction or series of transactions that—

(a) falls in relation to the tonnage tax company to be regarded as made or imposed in the course of, or with respect to, its tonnage tax trade, and

(b) does not fall in relation to the other person to be regarded as made or imposed in the course of, or with respect to, a tonnage tax trade carried on by that person,

Part 4 of the Taxation (International and Other Provisions) Act 2010 (transactions not at arm's length) has effect with the omission of sections 174 to 184, 187 to 189 and 191 to 196 (elimination of double counting etc).

(2) Expressions used in Part 4 of the Taxation (International and Other Provisions) Act 2010 have the same meaning in this paragraph.

(3) Nothing in this paragraph affects the computation of a company’s tonnage tax profits.

Transactions not at arm’s length: between tonnage tax trade and other activities of same company

59

(1) Part 4 of the Taxation (International and Other Provisions) Act 2010 (transactions not at arm’s length) applies to provision made or imposed as between a company’s tonnage tax trade and other activities carried on by it as if—

(a) that trade and those activities were carried on by two different persons,

(b) the provision were made or imposed between those persons by means of a transaction, and

(2) As applied by sub-paragraph (1), Part 4 of the Taxation (International and Other Provisions) Act 2010 has effect with the omission of sections 174 to 184, 187 to 189 and 191 to 196 (elimination of double counting etc).

(3) Expressions used in Part 4 of the Taxation (International and Other Provisions) Act 2010 have the same meaning in this paragraph.

(4) Nothing in this paragraph affects the computation of a company’s tonnage tax profits.

Transactions not at arm’s length: duty to give notice

60

(1) Not more than 90 days after—

(a) the making of an election under this Schedule, or the occurrence of any other event, as a result of which a company enters, or is taken to have entered, tonnage tax, or

(b) the making of an election under this Schedule as a result of which a company will become a tonnage tax company at a later date,

the company shall give notice under this paragraph to any person whose tax liability may be affected by paragraph 58 (transactions not at arm’s length).

(2) The notice must state—

(a) that the company has become a tonnage tax company, or

(b) that an election has been made under this Schedule as a result of which the company will become a tonnage tax company,

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