Moore Stephens survey confirms UK Tonnage Tax success

Leading shipping accountant and business consultant Moore Stephens says the

results of a major survey into the operation of the UK Tonnage Tax scheme

show it to have been an overwhelming success. Owners who took part in the

survey were taken equally from those in the scheme and those outside it.

The clearest message from the survey is that the UK tonnage tax regime is

very successful. 100% of respondents who elected to enter tonnage tax felt

that making an election had been advantageous. The majority of respondents

who were part of an overseas group were considering transferring more ships

to the UK. A majority of respondents who did not make a tonnage tax

election would consider making an election in the future, if permitted to do

so.

Sue Bill, shipping tax partner, says, “The most important reason for

entering tonnage tax was, as expected, the low level of tax on shipping

operations. The fact that there is no UK flag requirement was also an

important factor for respondents in deciding to enter the tonnage tax regime

and it is unfortunate that the EU has changed the rules after companies have

made the election. The certainty and simplicity of calculating the

corporation tax liability were also important factors. All of the

respondents felt that their tax position would be simpler under tonnage tax

than under normal corporation tax rules.

“The survey also confirmed our view that the Inland Revenue clearance

procedure is highly successful. All of the respondents who used the

clearance procedure felt that it had been helpful and the vast majority felt

that the Inland Revenue had been very or partially helpful. No respondents

felt that there had been any questions raised which the Inland Revenue did

not answer.”

The survey also asked respondents what they would most like to change about

the tonnage tax regime. Most respondents wanted to ensure that tax was not

payable under the normal rules on interest received by tonnage tax

companies. Respondents also wanted to ensure that no personal tax was

payable on dividends received by non-corporate shareholders of tonnage tax

companies. Surprisingly few respondents wanted to change the training

requirements.

“The deadline for making submissions to the Inland Revenue as part of their

Post Implementation Review of Tonnage Tax is the end of September 2004. As

a result of the survey, Moore Stephens will be making further representations to the Inland Revenue that they consider carefully whether the UK tonnage tax regime can be expanded and that a further opportunity should be given to UK shipowners to make an election,” says Bill. “Moore Stephens also intends to put forward a proposal that LLP’s can be within tonnage tax as partners in LLP’s are not subject to tax on the withdrawal of

funds, as is the case where dividends are received by non-corporate shareholders of tonnage tax companies.”