7 APRIL 2000 FINANCE BILL TONNAGE TAX

The Finance Bill published today includes a Clause and Schedule to provide for “tonnage tax“, an optional new tax regime for shipping companies. This regime will form an important part of the package of measures being introduced to encourage the resurgence of the UK shipping industry. Its inclusion in the Finance Bill follows a period of consultation with the shipping industry and other interested parties.

DETAILS

1. Tonnage tax was announced by the Government in August 1999, following the publication of an independent report by Lord Alexander of Weedon QC.

2. Draft legislation was issued for consultation on 23 December 1999 and interested parties were invited to comment. The Government is grateful for the comments that have been made during the consultation period. The Clause and Schedule included in the Finance Bill reflect comments made during the consultation period. No major changes were required but a large number of minor amendments have been made on points of detail.

3. Further clarification of the way in which tonnage tax will be administered will be provided by way of Statement of Practice and Regulations. These will be released for consultation in due course.

4. Subject to EC and Parliamentary approval, it is intended that the regime will be available for acounting periods commencing on or after 1 January 2000.

NOTES FOR EDITORS

1. Tonnage tax is a new regime that will enable the calculation of a shipping company’s taxable profits to be based on the tonnage of the ships operated by the company rather than by reference to its accounting profits.

2. The regime will apply only to qualifying shipping activities carried out by qualifying shipping companies. The regime is optional and an election must be made in order for it to apply. An election will apply to all qualifying companies within a group and will last for an initial period of 10 years.

3. A company participating in the tonnage tax regime must meet a minimum training obligation for the training of officer cadets. This aspect will be administered by the Department of the Environment, Transport and the Regions who will require companies to agree training plans in respect of ships benefiting from the new tax regime.

4. Tonnage tax is a notifiable State aid and cannot be brought into operation until finally agreed with the European Commission. The UK has informed the Commission about tonnage tax and is on course to receive a favourable response by the time this Bill becomes law.

5. Lord Alexander’s Report `Independent Enquiry into a Tonnage Tax’ was published on 12 August 1999. It is available from The Public Enquiry Unit at HM Treasury or on the Internet at http://www.hm-treasury.gov.uk.