Section 226: the tonnage tax scheme

What counts as "operating" a ship

A company is treated as operating a ship or inland vessel if it operates any ship or inland vessel, whether owned or chartered by it - including where it has chartered in only part of the ship or inland vessel, such as under a slot charter, space charter or joint charter arrangement.

A company is not treated as operating a ship or inland vessel that it has chartered out on bareboat charter-cum-demise terms, or on bareboat charter terms for a period exceeding three years.

Separate business treatment

A tonnage tax company engaged in operating qualifying ships computes the profits from that business under the tonnage tax scheme, and the tonnage tax business is treated as a business distinct from all the company's other activities or businesses. Its profits are computed separately from profits and gains of any other business.

The scheme only applies if opted for

The tonnage tax scheme applies only if the company has made an option to that effect under Section 231. If a company operating qualifying ships is not covered by the scheme, or has not exercised the option, its profits from that business are computed under the Act's other provisions in the ordinary way.

Effect once opted in

Once the scheme applies, the tonnage income (computed under Section 227) is deemed to be profits chargeable under the head "Profits and gains of business or profession", while the "relevant shipping income" referred to in Section 228(1) is not chargeable to tax.

Frequently asked questions