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TAXATION


Tonnage tax Now into its second decade, the vital role of tonnage tax in reviving the UK shipping industry is clear. Since the regime was introduced in 2000, the UK- registered fleet has grown six-fold, the UK-owned and operated fleet three-fold, and numbers of new officer recruits have almost doubled. The threat to this success from a narrowly


legalistic approach to the regime has been overcome. Working closely with the Chamber, a new team at HM Revenue & Customs (HMRC) has revised the regime’s rule book, restoring its original intent. The ‘strategic and commercial management’ test, which determines eligibility for tonnage tax, has been re-cast and the rigid insistence that every company must have its technical management in the UK has been removed. Equally, Treasury ministers have confirmed the


coalition government’s commitment to tonnage tax and the UK shipping industry. Alongside the revision of the rule book, this ministerial assurance has staunched the sense of uncertainty. The regime once again looks certain and secure. One disappointment persists – the dispute about whether anchor-handling vessels fall within the scope of the tug paragraph in the EU State Aid Guidelines, and therefore whether they must be flagged in an EU country in order to qualify for tonnage tax, remains unresolved. HMRC still contends that they do, but has agreed to seek an opinion from the European Commission.


EU State Aid Guidelines The overdue review of the European Commission’s Guidelines on State Aid to Maritime Transport is now


8 TAXATION


THE ‘STRATEGIC


AND COMMERCIAL MANAGEMENT’ TEST, WHICH DETERMINES ELIGIBILITY FOR TONNAGE TAX, HAS BEEN RE-CAST AND THE RIGID INSISTENCE THAT EVERY COMPANY MUST HAVE ITS TECHNICAL MANAGEMENT IN THE UK HAS BEEN REMOVED


Stability has been restored to the UK’s tonnage tax regime, and preparations are in hand to secure a similarly successful outcome from the forthcoming review of the EU State Aid Guidelines.


set for 2012. The guidelines provide the legal base for all state aid, including tonnage tax regimes, and define their scope. The European Community Shipowners’ Association (ECSA) has already drawn the commission’s attention to the record of tonnage tax across the EU in enabling European shipping companies to compete successfully in global markets, and has called for the guidelines to be renewed. Under Chamber leadership, ECSA has also


prepared detailed papers addressing four aspects of the guidelines that have proved difficult, including their scope. Confirmation will be sought that the guidelines apply to all merchant ships, as implemented in practice to date, thus expressly avoiding a narrow misreading – which is sometimes suggested – of ‘maritime transport’ as embracing only those ships that physically carry goods or passengers for reward between two places. Other papers call for clarification of qualifying activities, financial income and the ratio for time-chartered ships.


VAT In the closing weeks of 2011, the commission published proposals for a general overhaul of VAT. Once again, these include the imposition of VAT on ferry and cruise tickets, ostensibly to create a level playing field across all intra-EU passenger transport. The shipping industry is preparing for a re-


run of the debate, held when VAT was created and several times since, about how social considerations militate against raising the cost of public transport and how administrative complexity renders the proposal impracticable. A parallel repeat debate, on applying VAT to


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