Finance Bill - continued        House of Commons
SCHEDULE 22, TONNAGE TAX - continued

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  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 qualifying ships, and
 
    (c) those ships are strategically and commercially managed in the United Kingdom.
      (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 any qualifying ships.
 
  It does not apply where a company continues to operate 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 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 the qualifying ship or ships it operated 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.
 
  "Filing date" and "company tax return" here have the same meaning as in Schedule 18 to the Finance Act 1998.
 
      (4) This paragraph ceases to apply if and when the company-
 
 
    (a) abandons its intention to resume operating qualifying ships, or
 
    (b) again in fact operates 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 of passengers,
 
    (b) the carriage of cargo,
 
    (c) towage, salvage or other marine assistance, or
 
    (d) transport 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-
 
 
    paragraph 20 (vessels excluded from being qualifying ships), and
 
    paragraph 21 (power to exclude other kinds of vessel).
      (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.
 
 
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;
 
    (c) harbour or river ferries;
 
    (d) offshore installations;
 
    (e) tankers dedicated to a particular oil field.
      (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) In sub-paragraph (1)(d) "offshore installation" means-
 
 
    (a) an offshore installation within the meaning of the Mineral Workings (Offshore Installations) Act 1971, or
 
    (b) what would be such an installation if the references in that Act to controlled waters were to any waters.
      (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).
 
 
Power to exclude other kinds of vessel
     21. The Treasury may make provision by order excluding other kinds of vessel 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 as a vessel of an excluded kind 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 as a vessel of an excluded kind 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 as a vessel of an excluded kind are to use as a vessel of a kind excluded by paragraph 20 or under paragraph 21 from being a qualifying ship.
 
 
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