Explanatory note

The tonnage tax regime is a system of taxation for shipping companies provided for by section 82 of, and Schedule 22 to, the Finance Act 2000 (c. 17).

Paragraph 8 of Schedule 7 to the Finance Act 2005 (c. 7) introduced changes to the tonnage tax regime, in order to comply with the (then) European Community guidelines on State aid to maritime transport. Schedule 22 to the Finance Act 2000 was amended to include a general requirement that ships entering the tonnage tax regime should in future be Community-flagged (registered in the European Union or European Economic Area).

Paragraph 22B(2) of Schedule 22 gives the Treasury the power to make an Order disapplying that requirement on a year-by-year basis. Before such an Order can be made, paragraph 22C(1)(a) requires the Treasury to be satisfied that the percentage of the tonnage tax fleet which is Community-flagged has not decreased on average over a three year period. For the purposes of meeting that condition, regulation 2 prescribes as the three year period the period beginning on 2nd October 2015 and ending on 1st October 2018. Regulation 3 also specifies the meaning of percentage of the tonnage tax fleet which is Community-flagged in relation to the prescribed period. Regulation 4 revokes the Tonnage Tax (Prescribed and Specified Matters) Regulations 2018.

A Tax Information and Impact Note has not been produced for this instrument as it contains no substantive changes to tax policy.